Académique Documents
Professionnel Documents
Culture Documents
NETWORK, L.P.
Debtor.
TRUST,
Plaintiff,
v.
Defendants.
Chapter 11
PLAINTIFFS COMPLAINT
Robert E. Ogle, as Litigation Trustee of the HRSN Litigation Trust (Plaintiff) files this
Complaint against Comcast Corporation, Comcast Sports Management Services, LLC, Comcast
Cable Communications, LLC, Houston SportsNet Finance, LLC, Houston SportsNet Holdings,
LLC, National Digital Television Center, LLC (d/b/a Comcast Media Center), Comcast
1
SportsNet California, LLC, NBCUniversal Media, LLC (f/k/a NBCUniversal, Inc.), Jon Litner,
John Ruth, Robert Pick, and Madison Bond (collectively, Comcast Defendants) and
respectfully states:
Introduction
1.
directors, and subsidiaries to [b]e honest, fair and trustworthy in all [their] business activities
and relationships. Yet, year after year, Comcast is consistently ranked amongst the worst in
customer service in the country, with a number of particularly egregious examples of its
customer interactions going viral this past year. But individual customers are not the only ones
who have borne the brunt of Comcasts bad behavior. Houston Regional Sports Network, L.P.
(the Debtor or the Network) has experienced Comcasts dishonesty firsthand. Through the
Debtor, Comcast partnered with the Houston Astros and the Houston Rockets to operate a
regional sports network that would produce and distribute sports-related programming to
Houstons sports fans. But instead of working with its partners for the good of the Debtor and
the Houston community, Comcast did everything in its power to financially impair the Debtor so
that Comcast would have the leverage to acquire the Debtors greatest assets (i.e., the right to
broadcast Astros and Rockets games, and related programming) for itself at a significant
discount.
Parties
2.
Plaintiff HRSN Litigation Trust is a litigation trust with its principal place of
business in Houston, Texas. Robert E. Ogle is the Litigation Trustee of the HRSN Litigation
Trust (the Litigation Trustee) and files this action in this capacity. The HRSN Litigation
Trust was created pursuant to the Third Amended Chapter 11 Plan of Reorganization Dated
October 29, 2014 in Respect of Houston Regional Sports Network, L.P. (the Plan of
Reorganization), which was confirmed on October 30, 2014. On November 17, 2014 (the
Effective Date), the Debtor transferred to the HRSN Litigation Trust the Transferred Causes of
Action (as defined in the Plan of Reorganization), which includes certain causes of action of the
Debtor against the Comcast Entities (as defined in the Plan of Reorganization). The HRSN
Litigation Trust was established for the benefit of the holders of Litigation Trust Beneficial
Interests, who are creditors of the Debtors estate as created under 541 of the Bankruptcy Code
upon the commencement of the above-captioned Chapter 11 case (the Estate). The Litigation
Trustee was appointed to be the representative of the Estate to pursue the Transferred Causes of
Action on behalf of the Estate and its creditors who suffered generalized injuries as a result of
Comcast Defendants wrongful conduct.
3.
belief, is a corporation organized and existing under the laws of the Commonwealth of
Pennsylvania, with its principal place of business located at One Comcast Center, 1701 John F.
Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Comcast Corp. has appeared in the
above-captioned Chapter 11 bankruptcy proceeding as an interested party, and may be served
with process pursuant to FED. R. BANKR. P. 7004(b) by mailing a copy of this Complaint and the
summons by first class mail postage prepaid to Arthur R. Block (Senior VP, General Counsel,
and Secretary for Comcast Corp.) c/o Comcast Corporation, One Comcast Center, 1701 John F.
Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Service is also being made on Comcast
Corp.s counsel of record: Vincent P. Slusher, c/o DLA Piper (US) LLP, 1717 Main, Suite 4600,
Dallas, TX 75201.
4.
information and belief, is a limited liability company organized and existing under the laws of
the State of Delaware, with its principal place of business located at One Comcast Center, 1701
John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Comcast Services has appeared
in the above-captioned Chapter 11 bankruptcy proceeding as an interested party, and may be
served with process pursuant to FED. R. BANKR. P. 7004(b) by mailing a copy of this Complaint
and the summons by first class mail postage prepaid to Jon D. Litner (President of Comcast
Services) c/o Comcast Sports Management Services, LLC, 1 Blachley Road, Stamford, CT
06902. Service is also being made on Comcast Services counsel of record: Vincent P. Slusher,
c/o DLA Piper (US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
5.
information and belief, is a limited liability company organized and existing under the laws of
the State of Delaware, with its principal place of business located at 200 Cresson Boulevard,
Oaks, PA 19456. Comcast Cable has appeared in the above-captioned Chapter 11 bankruptcy
proceeding as an interested party, and may be served with process pursuant to FED. R. BANKR. P.
7004(b) by mailing a copy of this Complaint and the summons by first class mail postage prepaid
to Arthur R. Block (Senior VP and Secretary for Comcast Cable) c/o Comcast Corporation, One
Comcast Center, 1701 John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Service
is also being made on Comcast Cables counsel of record Vincent P. Slusher, c/o DLA Piper (US)
LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
6.
information and belief, is a limited liability company organized and existing under the laws of
the State of Delaware, with its principal place of business located at One Comcast Center, 1701
John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Comcast Lender has appeared
in the above-captioned Chapter 11 bankruptcy proceeding as an interested party, and may be
served with process pursuant to FED. R. BANKR. P. 7004(b) by mailing a copy of this Complaint
and the summons by first class mail postage prepaid to Robert S. Pick (Senior VP of Comcast
Lender) c/o Comcast Corporation, One Comcast Center, 1701 John F. Kennedy Boulevard,
Philadelphia, Pennsylvania 19103. Service is also being made on Comcast Lenders counsel of
record: Vincent P. Slusher, c/o DLA Piper (US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
7.
information and belief, is a limited liability company organized and existing under the laws of
the State of Delaware, with its principal place of business located at One Comcast Center, 1701
John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103. Comcast Partner has appeared
in the above-captioned Chapter 11 bankruptcy proceeding as an interested party, and may be
served with process pursuant to FED. R. BANKR. P. 7004(b) by mailing a copy of this Complaint
and the summons by first class mail postage prepaid to John Ruth (officer of Comcast Partner)
c/o Comcast Sports Management Services, LLC, 1 Blachley Road, Stamford, CT 06902. Service
is also being made on Comcast Partners counsel of record: Vincent P. Slusher, c/o DLA Piper
(US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
8.
Defendant National Digital Television Center, LLC (d/b/a Comcast Media Center)
(Comcast Media), on information and belief, is a limited liability company organized and
existing under the laws of the State of Colorado, with its principal place of business located at
One Comcast Center, 1701 John F. Kennedy Boulevard, Philadelphia, Pennsylvania 19103.
Comcast Media has appeared in the above-captioned Chapter 11 bankruptcy proceeding as an
interested party, and may be served with process pursuant to FED. R. BANKR. P. 7004(b) by
mailing a copy of this Complaint and the summons by first class mail postage prepaid to Bruce
A. Davis (VP of Financial Operations for Comcast Media) c/o National Digital Television
Center, LLC, 4100 E. Dry Creek Road, Centennial, CO 80122. Service is also being made on
Comcast Medias counsel of record: Vincent P. Slusher, c/o DLA Piper (US) LLP, 1717 Main,
Suite 4600, Dallas, TX 75201.
9.
information and belief, is a limited liability company organized and existing under the laws of
the State of Delaware, with its principal place of business located at 4450 East Commerce Way,
Sacramento, CA 95834. Comcast California has appeared in the above-captioned Chapter 11
bankruptcy proceeding as an interested party, and may be served with process pursuant to FED.
R. BANKR. P. 7004(b) by mailing a copy of this Complaint and the summons by first class mail
postage prepaid to John Ruth (Executive VP of Finance, Planning and Business Operations for
Comcast California) c/o Comcast Sports Management Services, LLC, 1 Blachley Road,
Stamford, CT 06902. Service is also being made on Comcast Californias counsel of record:
Vincent P. Slusher, c/o DLA Piper (US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
10.
(NBCU),1 on information and belief, is a limited liability company organized and existing
under the laws of the State of Delaware, with its principal place of business located at 30
Rockefeller Plaza, New York, NY 10112. NBCU has appeared in the above-captioned Chapter
11 bankruptcy proceeding as an interested party, and may be served with process pursuant to
FED. R. BANKR. P. 7004(b) by mailing a copy of this Complaint and the summons by first class
On information and belief, NBCUniversal, Inc. was converted to a limited liability company (NBCUniversal
Media, LLC) on January 28, 2011.
mail postage prepaid to Stephen B. Burke (CEO of NBCU) c/o NBCUniversal Media, LLC, 30
Rockefeller Plaza, New York, NY 10112. Service is also being made on NBCUs counsel of
record: Vincent P. Slusher, c/o DLA Piper (US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
On information and belief, at all times relevant to Plaintiffs causes of action asserted herein,
NBCU was acting as an agent of Comcast Corp., Comcast Services, Comcast Cable, Comcast
Lender, and/or Comcast Partner.
11.
residing in the State of Connecticut. Ruth has appeared in the above-captioned Chapter 11
bankruptcy proceeding as an interested party, and may be served with process pursuant to FED.
R. BANKR. P. 7004(b) by mailing a copy of this Complaint and the summons by first class mail
postage prepaid to John Ruth c/o Comcast Sports Management Services, LLC, 1 Blachley Road,
Stamford, CT 06902 (the address where, on information and belief, Ruth regularly conducts
business). Service is also being made on Ruths counsel of record Vincent P. Slusher, c/o DLA
Piper (US) LLP, 1717 Main, Suite 4600, Dallas, TX 75201.
times material to this action, Ruth was an officer, director, agent, and/or employee of Comcast
Services, NBCU, Comcast California, and Houston Regional Sports Network, LLC.
On
information and belief, Ruth has actively participated in and/or benefitted directly from the
tortious activities described herein, both in his individual capacity and as an officer, director,
agent, and/or employee of Comcast Services, NBCU, Comcast California, and/or Houston
Regional Sports Network, LLC.
13.
residing in the State of New Jersey. Pick may be served with process pursuant to FED. R.
BANKR. P. 7004(b) by mailing a copy of this Complaint and the summons by first class mail
postage prepaid to Robert Pick c/o Comcast Corporation, One Comcast Center, 1701 John F.
Kennedy Boulevard, Philadelphia, Pennsylvania 19103 (the address where, on information and
belief, Pick regularly conducts business). On information and belief, at all times material to this
action, Pick was an officer, director, agent, and/or employee of Comcast Corp., Comcast Partner,
and/or Comcast Lender.
benefitted directly from the tortious activities described herein, both in his individual capacity
and as an officer, director, agent, and/or employee of Comcast Corp., Comcast Partner, and/or
Comcast Lender.
14.
individual residing in the State of New York. Bond may be served with process pursuant to FED.
R. BANKR. P. 7004(b) by mailing a copy of this Complaint and the summons by first class mail
postage prepaid to Matt Bond c/o NBCUniversal Media, LLC, 30 Rockefeller Plaza, New York,
NY 10112 (the address where, on information and belief, Bond regularly conducts business). On
information and belief, at all times material to this action, Bond was an officer, director, agent,
and/or employee of NBCU and/or Comcast Services. On information and belief, Bond has
actively participated in and/or benefitted directly from the tortious activities described herein,
both in his individual capacity and as an officer, director, agent, and/or employee of NBCU
and/or Comcast Services.
Jurisdiction and Venue
15.
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C.
157 and 1334 and FED. R. BANKR. P. 7001. Further, 13.1(xiv) of the Plan of Reorganization
provides that this Court shall retain and shall have exclusive jurisdiction . . . [t]o hear and
determine all controversies, suits, and disputes that may related to, impact upon, or arise in
connection with Causes of Action of the Debtor (including Avoidance Actions and Transferred
Causes of Action) commenced by . . . the Litigation Trustee . . . before or after the Effective
Date . . . The present Complaint falls within this Courts retained jurisdiction.
16.
above-captioned chapter 11 case. Plaintiff consents to the entry of final orders or judgment by
this Bankruptcy Court, pursuant to Rule 7008 of the Federal Rules of Bankruptcy Procedure.
17.
The Court has personal jurisdiction over Comcast Defendants pursuant to FED. R.
BANKR. P. 7004(f) and/or TEX. CIV. PRAC. & REM. CODE 17.042, and the exercise of such
jurisdiction is consistent with due process under the United States Constitution.
18.
Venue for this adversary proceeding is proper in this Court pursuant to 28 U.S.C.
1409. Venue is also proper pursuant to 28 U.S.C. 1391(b)(2) because a substantial part of the
events, acts, errors, omissions, and misrepresentations that give rise to the claims at issue in this
case occurred in this District.
Factual Background
A.
The Debtor was a Delaware limited partnership formed by the Astros2 and the
Rockets3 in 2003 to operate a regional sports network (CSN Houston or the Service) that
produces and distributes content relating to Houstons sports teams, including the Houston
Astros,4 the Houston Rockets,5 and the Houston Dynamo. The substantial majority of the
Debtors revenue would be derived from affiliation agreements with multi-channel video
programming distributors (MVPDs) for the redistribution of CSN Houston in exchange for
monthly, per-subscriber rates.
20.
As of May 8, 2003, the Debtor consisted of two limited partners, Rockets Partner,
L.P. (Rockets Partner) and Houston McLane Company, LLC (HMC), and one general
Unless otherwise specified, Astros refers to Houston Astros, LLC and/or its affiliates and predecessors
including McLane Company, LLC f/k/a Houston McLane Company, Inc. d/b/a the Houston Astros.
Unless otherwise specified, Rockets refers to Rockets Partner, L.P., JTA Sports, Inc., Rocket Ball, Ltd.,
and/or their affiliates and predecessors.
Unless otherwise specified, Houston Astros refers to the Major League Baseballs Houston Astros franchise.
Unless otherwise specified, Houston Rockets refers to the National Basketball Associations Houston
Rockets franchise.
10
partner, Houston Regional Sports Network, LLC (General Partner). The General Partner was
formed as a Delaware limited liability company and consisted of two members: JTA Sports, Inc.
(Rockets Member) and HMC. On or around May 10, 2010, HMC transferred (i) its limited
partnership interest in the Debtor to McLane HRSN LP Holdings, LLC (Astros Partner) and
(ii) its membership interest in the General Partner to McLane HRSN GP Holdings, LLC (Astros
Member).6
21.
affiliates of Rocket Ball, Ltd. (Rocket Ball), the owner of the Houston Rockets. As owner of
the Houston Rockets, Rocket Ball has the right to exhibit and exploit, and license to others the
rights to exhibit and exploit, certain team-related programming by licensed distribution means.
Rocket Ball and the Debtor were parties to a Media Rights License Agreement (as amended
through October 22, 2010, the Original Rockets Media Rights Agreement), through which
Rocket Ball granted the Debtor the exclusive right and license to produce and exhibit or
otherwise exploit all of the specified programming of the Houston Rockets.
22.
HMC was the prior owner of the Houston Astros, and is the predecessor to
Houston Astros, LLC (Astros LLC), the current owner of the Houston Astros.7 Astros Partner
and Astros Member (collectively, Astros Constituents) are affiliates of Astros LLC (and
former affiliates of HMC). As owner of the Houston Astros, Astros LLC (and previously HMC)
has the right to exhibit and exploit, and license to others the rights to exhibit and exploit, certain
team-related programming by licensed distribution means. HMC and the Debtor were parties to
The terms Astros Member and Astros Partner, as used herein, also refer to the successors of such entities
(i.e., Astros HRSN GP Holdings, LLC and Astros HRSN LP Holdings, LLC).
In 2011, Houston Baseball Partners LLC (HBP) purchased the Houston Astros, including the approximately
46% equity interest in the Debtor, from HMC and its affiliates for $615 million.
11
a Media Rights License Agreement (as amended through October 22, 2010, the Original Astros
Media Rights Agreement), through which HMC granted the Debtor the exclusive right and
license to produce and exhibit or otherwise exploit all of the specified programming of the
Houston Astros.
B.
In 2010, Comcast,8 the largest cable company in the Houston metropolitan area,
expressed an interest in purchasing an interest in the Debtor. One of the largest and most
sophisticated companies in the United States, Comcast is a Fortune 50 company with more than
$68 billion in revenue reported last year. It is an experienced and aggressive player in the
mergers and acquisitions market, as well as in the ownership and operation of sports television
networks. Through its various affiliates and subsidiaries, Comcast owns and operates a chain of
regional sports networks around the country.
24.
After lengthy negotiations and a competitive bid process, on October 29, 2010,
Comcast Partner was admitted as a limited partner in the Debtor and a member of the General
Partner. As a result, Comcast Partner held 22.443% of the equity interests in the Debtor, while
Rockets Partner, Astros Partner, and the General Partner held 30.923%. 46.384%, and 0.25%,
respectively. Comcast Partner also held 22.5% of the equity interests in the General Partner,
while Rockets Member and Astros Member held 31.0% and 46.5%, respectively. The primary
reason the Debtor chose to partner with Comcast was because it represented to the Debtor that it
would use its immense market power to achieve carriage of CSN Houston at the promised rates.
Unless otherwise specified, Comcast refers to Comcast Corp. and/or its direct and indirect wholly-owned and
partially owned subsidiaries, including but not limited to Comcast Partner, Comcast Services, Comcast Cable,
Comcast Finance, Comcast Media, and Comcast California.
12
25.
The rights and responsibilities of the Debtors partners were governed by the
Second Amended and Restated Agreement of Limited Partnership of Houston Regional Sports
Network, L.P. (as amended, the LP Agreement). Pursuant to the LP Agreement, the Debtor
was managed by the General Partner, which itself was governed by the Second Amended and
Restated Limited Liability Company Agreement of the General Partner (as amended, the LLC
Agreement). The General Partner was managed by a board of directors (the GP Board, and
each member thereof a Director). The GP Board consisted of one individual appointed by
Rockets Member (Tad Brown), one individual appointed by Astros Member (James Crane),9 and
two individuals appointed by Comcast Partner (Litner and Ruth). Under the LP Agreement and
the LLC Agreement, unanimous consent of the Directors of the GP Board was required for
various actions by the Debtor.
26.
Also on October 29, 2010, the Debtor entered into various agreements with other
Comcast affiliates related to the operation and business of the Debtor, including, but not limited
to, the following:
13
27.
In conjunction with executing the above agreements with the various Comcast
entities, the Debtor also amended its Original Media Rights Agreements with the Astros and the
Rockets on October 29, 2010. Specifically, the Debtor and HMC executed an Amended and
Restated Media Rights Agreement (Astros Media Rights Agreement), pursuant to which
HMC granted the Network the exclusive right and license to produce and exhibit or otherwise
exploit all of the Available Games, Related Shows and Additional Programming (each as defined
in the Astros Media Rights Agreement) of the Houston Astros through the year 2032.10 In
exchange for such right and license, the Debtor agreed to make, over time, hundreds of millions
of dollars of payments to HMC. Similarly, the Debtor and Rocket Ball executed an Amended
and Restated Media Rights Agreement (Rockets Media Rights Agreement, and collectively
with the Astros Media Rights Agreement, the Media Rights Agreements), pursuant to which
Rocket Ball granted the Network the exclusive right and license to produce and exhibit or
otherwise exploit all of the Available Games, Related Shows and Additional Programming (each
as defined in the Rockets Media Rights Agreement) of the Houston Rockets through the year
2032. In exchange for such right and license, the Debtor agreed to make, over time, hundreds of
millions of dollars of payments to Rocket Ball. Under both Media Rights Agreements, if the
10
HMC assigned its rights and interests in the Astros Media Rights Agreement to Astros LLC when HBP
purchased the Houston Astros in 2011.
14
Debtor failed to make a required media rights payment and did not cure such default within sixty
(60) days, the Astros and the Rockets would each be entitled to terminate their respective Media
Rights Agreement.
C.
Comcast decides to financially cripple the Debtor in order to obtain the Debtors
assets for itself.
28.
Comcast decided that, instead of working to make the Debtor successful, it would do everything
in its power to acquire for itself the Debtors primary and most valuable assets: the right to
telecast programming related to the Houston Astros and Houston Rockets, and the right to
receive revenue from affiliation agreements with MVPDs that carry CSN Houston (collectively,
the Assets).
29.
In or around February 2012, Comcast Services and its affiliate, NBCU,11 pursuant
to the Comcast Services Agreement,12 began to reach out to MVPDs in advance of a planned
October 2012 launch of CSN Houston. On February 28, the GP Board approved the 2012 budget
for the Debtor.
11
12
Although NBCU was not a party to the Comcast Services Agreement, on information and belief, it was
subcontracted and/or authorized by Comcast Services to provide certain services pursuant to that agreement,
including but not limited to, services related to obtaining distribution of CSN Houston. Indeed, Matt Bond,
Vice President of Content Distribution for NBCU, and Dana Zimmer, the number two affiliate sales person at
NBCU, were the two primary individuals responsible for leading the distribution effort. The Comcast Services
Agreement allows Comcast Services to subcontract any of its obligations under the agreement, but notes that
any such subcontract shall not relieve Comcast [Services] of its obligations and duties under this Agreement.
See Comcast Services Agreement, attached hereto as Exhibit A, at 2.6. The agreement further provides that
[a]s between Comcast [Services] and [the Debtor], Comcast [Services] shall be responsible for any breach of
this Agreement by any subcontractor that is performing Services that are otherwise required to be performed
directly by Comcast [Services] pursuant to Attachment B. Id.
15
30.
By June 2012, the Debtor had not entered into any affiliation agreements with any
major MVPDs (other than Comcast Cable). By September 2012 (one month before the launch of
CSN Houston), the Debtor, through Comcast Services/NBCU,13 had exchanged proposals with
certain MVPDs, but it still had not signed any new major affiliation agreements. Throughout
September and October 2012, the Debtor, through Comcast Services/NBCU, continued to
exchange proposals with various MVPDs. But the Debtor was unable to reach agreement with a
major MVPD at per-subscriber rates that would lead to a financially viable venture.
31.
This development led to a dispute within the GP Board regarding the Debtors
strategic next steps. In November 2012, after CSN Houston launched, the affiliate sales team at
NBCU recommended that the Debtor make a proposal to a major MVPD that was significantly
below the rates called for in the Business Plan. These lower rates, when plugged into the
business model, would have been financially crippling to the Debtor.
Business Plan not viable, the Astros Constituents requested that Comcast Services/NBCU
formulate an alternate business plan that demonstrated a profitable set of operating parameters,
starting with revenue adequate to achieve viability. The Astros Constituents also objected to the
MVPD proposal presented by Comcast Services/NBCU, reasoning that until a new viable
business plan was formulated, it would not be in the Debtors best interest to approve any key
revenue agreements. Without knowing exactly what types of deals would be required to make it
financially viable, the Debtor could not reasonably assess whether a particular deal should be
approved.
32.
Services/NBCU formulate a new business plan for the Debtor. Comcast Services/NBCU had the
13
For ease of reference, the term Comcast Services/NBCU shall mean Comcast Services and/or NBCU.
16
relevant expertise in this area and were obligated to provide those services under the Comcast
Services Agreement, so the Debtor was relying on them to put a new business plan together. Yet
Comcast Services/NBCU did not consider the Debtors concerns in good faith, as they were
required to do under the Comcast Services Agreement. See Ex. A, Comcast Services Agreement
at 2.2(e). Instead, when the Astros Director on the GP Board raised reasonable and justifiable
concerns about formulating a new business plan, Comcast Services/NBCU completely brushed
off such concerns as premature and refused to comply with his request.
Comcast
Services/NBCU did so despite being aware that the Debtor could not enter into any affiliation
agreements without the consent of the Astros Director. They also knew that, without incoming
revenue from major affiliation agreements, the Debtor could never survive financially. Indeed,
as of Spring 2013, the Debtor had not negotiated or entered into an affiliation agreement with
any major distributor other than Comcast Cable and, unsurprisingly, its revenue was far less than
the amount needed to keep pace with the Debtors costs.14
33.
new business plan. But, unbeknownst to the Debtor, Comcast had no intention of acting in the
Debtors best interest. Comcast had decided that, instead of working to make the Debtor
successful, it would do everything in its power to obtain the Debtors Assets for itself. If the
Debtor was struggling financially, Comcast would be best positioned to acquire the Debtor, or
substantially all of its assets, at a deeply discounted price.
14
Notably, even Litner concedes that by April 2013 it was no longer premature to prepare a new business plan
for the Debtor, yet Comcast Services/NBCU still failed to do so. And by September 2013, Litner admits that a
new business plan for the Debtor was required. But again, Comcast Services/NBCU failed to prepare or present
one.
17
34.
Failing to formulate a new business plan was not the only way Comcast sabotaged
the Debtors business. Comcast Services/NBCU had the means and resources to negotiate
affiliation agreements at higher rates, but intentionally chose not to do so. The primary reason
that the Debtor entered into a business relationship with Comcast was that, in addition to being
the largest cable provider in Houston, Comcast has enormous market power by virtue of the fact
that, through NBCU, it owns and operates a large portfolio of news and entertainment television
networks, including NBC.15 Thus, Comcast has business relationships with all of the major
MVPDs (e.g., DirecTV, AT&T, FOX, DISH Network, etc.), as these MVPDs must contract with
Comcast in order to carry these various networks. Due to Comcasts increased market power by
virtue of its larger networks, it had the ability to obtain carriage for its smaller regional sports
networks (Comcast RSNs), including CSN Houston, at higher rates.
35.
In fact, Comcast had indicated to the Debtor that it would use its strength in other
markets to get carriage for CSN Houston at financially viable rates. Yet, when negotiating with
MVPDs regarding carriage for the Debtor, Comcast Services/NBCU did not leverage this market
power as they indicated they would. Comcast did, however, on information and belief, employ
this strategy with its other Comcast RSNs. For example, on information and belief, in January
2013, Comcast entered into a global deal with Suddenlink that incorporated every network in
Comcasts portfolio except for CSN Houston. Comcast never brought this potential deal to the
GP Board. Indeed, the Debtor did not find out about the Suddenlink deal until after it had been
entered into.
15
Comcasts proposed acquisition of NBCU was announced in December 2009, almost a year before it became
involved with the Debtor. The acquisition received government approval, and Comcast took control of NBCU
on January 28, 2011.
18
36.
Comcasts reason for prioritizing and providing a higher level of service to the
other Comcast RSNs than it did for the Debtor is clear: money. On information and belief,
Comcast owned most, if not all, of the equity in those other Comcast RSNs, while it only owned
22.5% of the Debtor. Thus, Comcast Services/NBCU (and their affiliates) had a greater financial
incentive to promote and obtain distribution for the Comcast RSNs than it did for CSN
Houston.16 But an even greater motivating factor was Comcasts desire to obtain the Debtors
Assets for itself. Comcast knew that the best way to acquire these Assets at a low cost would be
to financially cripple the Debtor so that it would have no choice but to sell itself to Comcast.
Thus, on information and belief, Comcast Services/NBCU intentionally and willfully failed to
negotiate and obtain the best possible carriage rates for the Debtor.
37.
16
Moreover, Comcast Cable financially benefitted by being the only major MVPD that carried CSN Houston, as
Houston sports fans would be more likely to move to and/or stay with Comcast as their cable provider if they
wanted the ability to watch the Houston Astros and the Houston Rockets on their home televisions.
19
concerns about Comcast not using its leverage to obtain carriage for CSN Houston through
NBCU global distribution deals. In response, Litner (GP Board Director and President of
Comcast Services) claimed that CSN Houston had not been included in some of the more recent
global discussions because, as a timing matter, it was not in the Debtors best interest to do so.
Notably, this determination was made unilaterally by Comcast; the Debtor was never consulted
about these discussions and, in fact, did not even find out about them until after the global deal
had been finalized. Moreover, even assuming the timing excuse was true at that time, this does
not explain why Comcast Services/NBCU never included CSN Houston in a global distribution
deal in the four years it worked with Debtor.
39.
Debtor experienced liquidity constraints. And just as Comcast had hoped, by April 2013, the
Astros and the Rockets had proposed to sell their 77.5% equity interest in the Debtor to NBCU
based upon the original implied enterprise value of the Debtor (i.e., $700 million).
On
information and belief, Comcast did not want to pay that price and instead bided its time,
20
allowing the Debtor to become even more financially distressed, in the hopes that it could get
what it wanted at better terms.
40.
Comcast Corp. and Comcast Partner and Senior Vice President of Comcast Lender) sent an email to Rockets GP Board Director Brown and Margaret Barradas (Managing Director at Astros
affiliate Crane Capital Group), with the terms of a debt restructuring proposal that Comcast was
suggesting to the Debtor. In addition to suggesting that the Debtor enter into an affiliation
agreement with a major MVPD at rates below those set forth in the Business Plan, Comcast
proposed certain governance changes that would increase its own ability to control the Debtor by
taking control away from the Astros and Rockets. Not surprisingly, the Rockets and Astros GP
Board Directors would not agree to such terms.
41.
The Debtors liquidity concerns continued to worsen. On May 31, 2013, in order
to continue to satisfy its obligations under the Astros Media Rights Agreement, the Debtor
exhausted its $100 million line of credit under the Comcast Credit Agreement and the limited
partners of the Debtor agreed to a capital call. The limited partners then had to issue another
capital call in order to satisfy the Debtors June media rights payment to the Astros. But by the
next month, the Debtor was unable to make its July media rights payment to the Astros. Astros
LLC immediately notified the Debtor by letter that the failure to make such payment was an
Event of Default under the Astros Media Rights Agreement. The Debtor had until September
30, 2012 to cure the default; otherwise Astros LLC had the contractual right to terminate the
Astros Media Rights Agreement. On August 31, 2013, the Debtor again failed to make its
monthly media rights payment to the Astros, leading Astros LLC to send another notice of
default letter to the Debtor.
21
42.
Smelling blood in the water, Comcast Partner met with Astros Partner and
Rockets Partner on or around August 5, 2013, and proposed a potential buyout of the Astros
46.5% equity interest in the Debtor for more than $185 million (based on an implied enterprise
value of $500 million for the Debtor). With the Astros equity interest, Comcast Partner would
own the majority of, and be able to exercise total control over, the Debtor. Rockets Partner, who
had a contractual consent right to approve or veto the Astros sale of its equity, requested the
same deal (at the same value) from Comcast Partner. Because Comcast Partner refused, Rockets
Partner would not consent to the sale of the Astros equity.
43.
But while Comcast Partner was seemingly negotiating a potential deal with the
Astros, in actuality Comcast had concocted a plan to get what it wanted at a much cheaper price.
Comcast would put the Debtor into bankruptcy, which would cause its value to immediately
decrease. Comcast would then publicly announce its intention to bid a substantial amount of
money to acquire the Debtor, or substantially all of its assets, in bankruptcy, which would scare
away other potential purchasers.17 Finally, once Comcast was the only viable purchaser, it could
purchase the Debtor, or substantially all of its assets, at a steep discount from what it publicly
promised.
D.
Comcast has its affiliates file an involuntary bankruptcy petition against the Debtor
and does everything in its power to ensure that an order for relief is entered.
44.
Comcast knew that the unanimous consent of the Directors on the GP Board was
required in order for the Debtor to file a bankruptcy petition. So it conceived of a plan whereby
17
Because Comcast and the Debtor had an existing relationship, potential purchasers would reasonably assume
that Comcast would be the Debtors preferred purchaser, in order to avoid the additional time and expenses
associated with transitioning to a new owner. Thus, these potential purchasers would reasonably expect that
they would need to make a higher offer than Comcast in order to be considered. This is compounded by the fact
that Comcast Lender would likely be entitled to credit bid the $100 million it was owed pursuant to the Comcast
Credit Agreement.
22
its own affiliates would file a petition to place the Debtor into an involuntary bankruptcy. In
September of 2013, Comcast approached the Rockets, informed them that it wanted to place the
Debtor into bankruptcy, and asked if the Rockets would join them as petitioning creditors. The
Rockets told Comcast that they would be willing to support the bankruptcy, but only if Comcast
would commit to making a stalking horse bid for the Debtor in an amount equal to, or in the
proximity of, the valuation Comcast had placed on the Debtor just one month prior (i.e., $500
million). During a telephone call on or around September 26, 2013, Pick informed Tad Brown
that Comcast refused to make such a commitment. As a follow-up to this call, Comcasts
counsel, Craig Goldblatt, called the Rockets counsel, Alan Gover and Douglas Mayer on
September 26.
conversation the Rockets counsel asked Goldblatt why Comcast was not willing to make the
requested commitment. On information and belief, Goldblatt responded that there was no reason
for Comcast to commit to such a bid because the value of the Debtor would change (i.e.,
decrease) due to the bankruptcy.
45.
commenced involuntarily against the Debtor by Comcast Services, Comcast Media, Comcast
California, and Comcast Lender (collectively, the Comcast Petitioning Creditors).18 They
claimed that they filed the involuntary petition (the Petition) to prevent the Astros from
terminating the Astros Media Rights Agreement in order to preserve the going concern value of
the Debtor. But the Astros had not actually confirmed that they would terminate the Astros
Media Rights Agreement; on the contrary, the Astros were still negotiating in good faith for the
sale of their equity in the Debtor to Comcast. Indeed, on the Petition Date, but before the
18
23
Petition was actually filed, Michael Angelakis (Comcast Corp. Vice Chairman and CFO) had
received and read an e-mail from the Astros with a draft of terms for the proposed sale. The
Astros had no idea that, later that same day, the Comcast Petitioning Creditors would be placing
the Debtor into an involuntary bankruptcy.
46.
appoint a Chapter 11 trustee. They used this motion as an opportunity to express their interest in
acquiring the assets of the Debtor at a price that would result in a material distribution for the
limited partners and the General Partner (collectively, the Partners), stating:
The Network does have assets including the right to telecast
Astros and Rockets games, the right to receive monthly fees under
an affiliation agreement with [Comcast Cable] for distribution of
the Networks Services, and rights to receive revenue from a few
smaller operators that carry the Service. These assets have
significant value, the protection of which is the central purpose of
this involuntary bankruptcy filing.
[Comcast Lender], the
Networks secured lender, believes the Networks assets have
meaningful value, and would be prepared to make a bid to
acquire either the Network (under a plan of reorganization) or
substantially all of its assets. Comcast Lender believes that such
a transaction if it were to close by the end of the calendar year,
and based on the Networks indebtedness of which it is presently
aware and that which it anticipates the Network would incur by
year end would likely lead to prepetition creditors claims and
all reasonably foreseeable administrative expenses being paid
in full, and a material distribution to equity holders. [emphasis
added].
Pick (Senior VP of Comcast Corp., Comcast Partner, and Comcast Lender) made similar
statements in his declaration filed in support of the motion.
47.
At a September 30, 2013 hearing before the Bankruptcy Court, counsel for the
24
48.
to appoint a trustee, which again publicly reiterated Comcast Lenders interest in purchasing the
Debtors assets:
[Comcast Lender], the Networks sole secured lender, would be
prepared to make a bid to acquire either the Network (under a
plan of reorganization) or substantially all of its assets.
Comcast Lender believes that such a transaction if it were to
close by the end of 2013, and based on the Networks indebtedness
of which Comcast Lender is presently aware and that which it
anticipates the Network would incur by year end would likely
lead to full payment of all pre-petition creditors claims and all
reasonably foreseeable administrative expenses, and also lead
to a material distribution to equity holders. [emphasis added].
Pick again made similar statements in his declaration filed in support of the amended motion.
49.
The Astros Constituents and Astros LLC (the Astros Entities) immediately
filed a motion to dismiss the Petition, as well as an opposition to the trustee motion, arguing,
among other things, that the Petition should be dismissed because it was filed in bad faith and the
Comcast Petitioning Creditors failed to satisfy the requirements of 11 U.S.C. 303. In their
opposition to the Astros Entities motion to dismiss, filed October 15, 2013, the Comcast
Petitioning Creditors again reiterated Comcast Lenders intention to bid on the Debtors assets:
The critical facts are that the Network is losing money and has no
prospect of turning that around under the current governance
structure. But it is also true that the Network has value. And in
a fair and open bankruptcy auction conducted by a trustee, those
assets would go to the highest bidder. Perhaps Comcast Lender
will acquire the assets, and be in a position to operate the
Network free of the Astros veto rights. If the Astros value (or
any other party values) the Network more highly, that party would
have every opportunity to acquire the Network, free of Comcast
Owners rights under the partnership agreement to exercise control.
[emphasis added] [internal footnote omitted].
And in their reply supporting their trustee motion, filed October 24, 2013, the Comcast
Petitioning Creditors echoed the same sentiments: All that Comcast Lender has stated is that it
25
would be willing to make a bid in bankruptcy for the Network or substantially all of its
assets as part of an open auction process, and that such an acquisition would likely lead to
full payment of creditors claims. [emphasis added].
50.
At this time (October 2013), two of the three owners of the Debtor were at odds;
Comcast Partner supported the Petition, while the Astros Constituents opposed it. Thus, the
Debtors ability to act depended on the position of the Rockets Constituents.
51.
The Rockets Constituents, Clutch City Sports & Entertainment, L.P. (Clutch
City),19 and Rocket Ball (collectively, the Rockets Entities) filed a statement on October 21,
2013, opposing the appointment of a trustee, but supporting the entry of an order for relief under
Chapter 11. The Rockets Entities support of the Petition was based entirely on the Comcast
Petitioning Creditors repeated assurances that Comcast Lender would bid on the Debtor (or
substantially all of its assets) in the bankruptcy in an amount sufficient to pay all prepetition
creditors, administrative expenses, and provide a material distribution to equity holders. In their
statement, the Rockets Entities proposed, among other things, that (i) a responsible officer be
appointed to run the day-to-day operations of the Debtor and carry out the normal administrative
functions required of a debtor-in-possession, (ii) Comcast, the Rockets Entities, and the Astros
Entities engage in negotiations for one week to attempt to reach consensus on a path forward,
and (iii) the question of whether to appoint an estate fiduciary should be abated until it is
absolutely necessary to preserve the value of the estate.
19
Clutch City is an affiliate of Rocket Ball and the landlord under a Suite Lease, dated October 1, 2011, with the
Debtor, pursuant to which the Debtor is obligated to Clutch City for yearly rental installments in respect of a
suite at the Toyota Center.
26
52.
Based on the Rockets Entities support of the Petition, on October 24, 2013, HP
Fannin Properties, LP (HP Fannin), the Debtors landlord,20 also filed a statement in support
of the Petition. HP Fannin would not have supported the Petition if the Rockets Entities had not
supported it. In fact, the Rockets Entities affirmatively asked HP Fannin to support the Petition,
and HP Fannin agreed so long as the Rockets Entities filed their support of the Petition first.
53.
On October 28, 2013, the Bankruptcy Court held a hearing on the Petition, the
Astros Entities motion to dismiss, and the Comcast Petitioning Creditors trustee motion. While
being questioned by Arthur Burke (counsel for the Comcast Petitioning Creditors), Pick testified
as follows:
Q: Is Comcast Lender prepared to bid to require [sic] the Network
out of bankruptcy?
A: It is.
Q: And without giving a precise dollar figure, can you describe the
magnitude of the bid that Comcast Lender is prepared to make?
A: Based on the facts as we know it today, if the Network were
acquired by the end of this year, we believe we would bid an
amount that would be sufficient to pay all prepetition claims,
administrative expenses and return a significant amount of
equity to the partners. [emphasis added].
That same day, Clutch City and Rocket Ball (collectively, the Rockets Petitioning Creditors)
each filed formal joinders to the Petition. HP Fannin followed suit the next morning.
54.
Near the
conclusion of that hearing, the Bankruptcy Court announced that it would abate consideration of
whether an order for relief should be entered, whether the Petition should be dismissed, and
whether the disputes among the Partners ought to be considered by the Bankruptcy Court at all.
20
The Debtor, as tenant, and HP Fannin, as landlord, were parties to a Lease Agreement in connection with the
property at which the Debtor operated its business.
27
The Court then, with the consent of all parties, entered an order appointing the Astros as lead
negotiator for the Debtor and provided them through December 12, 2013 to conduct negotiations
with third parties for the purpose of restructuring or reorganizing the Debtor (the Negotiations
Order). Any final agreement that purported to bind the Debtor, however, would still be subject
to the approval of the GP Board and the Court.
55.
During their time as lead negotiator, the Astros spoke with various third parties
(e.g., AT&T, DirecTV, FOX, Dish Network, Time Warner) regarding a potential restructuring or
purchase of the Debtor. But many of these third parties told the Astros that they were not
interested in getting involved in the Debtors bankruptcy case, and, more importantly, that it was
their understanding that Comcast would be buying the Debtor out of bankruptcy, so it would be
futile for them to get involved. For example, FOX expressed its reluctance to become involved
in the Debtors bankruptcy proceedings.21 But FOX also affirmatively stated that it would be
willing to do a deal with better terms for the Debtor if the Debtor was not in bankruptcy. AT&T
and DirecTV also noted their extreme hesitation with getting involved in the Debtors
bankruptcy proceedings. In fact, on numerous occasions AT&T and/or DirecTV told the Debtor
that the bankruptcy was getting ugly and hurting [the Debtors] value.
56.
requesting information and documents related to the Debtor from the Astros.
This
documentation and information, while property of the Debtor, was maintained by Comcast
Services/NBCU pursuant to the Comcast Services Agreement.
Comcast provide such information so that the Astros could then provide it to the potential
21
FOX did make an extremely low offer to the Astros at this time, noting that it would only be worth its while to
deal with the bankruptcy proceedings if it could acquire the Debtor at a deeply discounted rate.
28
counterparties. But Comcast refused to release the requested information in a timely manner, in
violation of the Comcast Services Agreement. See Ex. A, Comcast Services Agreement at 2.5.
On information and belief, Comcasts obstructive behavior impeded the negotiations process.
57.
In late November (and on the eve of the statute of limitations), Astros affiliate,
HBP, filed a lawsuit in state court against McLane Champions, LLC, R. Drayton McLane Jr.,
Comcast Corp., NBCU, and Litner relating to HBPs purchase of the Astros in 2011 (the Astros
Lawsuit). In response, on November 22, 2013, Comcast Corp. and NBCU released a public
statement denouncing the Astros Lawsuit and stating, yet again, that they remain[] committed to
a reorganization of the Network in Bankruptcy Court.
58.
By December 12, 2013, the Astros were still negotiating with DirecTV regarding
a potential restructuring or reorganization of the Debtor, but had not yet finalized a deal. On that
same date, by agreement of the parties, the Bankruptcy Court entered an amended version of the
Negotiations Order pursuant to which the Rockets were named lead negotiator for the Debtor
through January 7, 2014 (the Amended Negotiations Order).22 Immediately following entry
of the Amended Negotiations Order, the Rockets began working with the Astros to continue the
third-party negotiations that the Astros had previously initiated.23 These negotiations continued
throughout December and into January.
59.
The Rockets also began to contact other potential transaction counterparties, both
strategic (i.e., within the media industry) and financial (i.e., private equity type investors). But
22
Similar to the Negotiations Order, the Amended Negotiations Order authorized the Rockets to investigate and
negotiate potential agreements, but any final agreement that purported to bind the Debtor would still be subject
to the approval of the GP Board and the Court.
23
DirecTV would not talk to the Rockets at first because it was concerned about violating a non-disclosure
agreement it had entered into with the Astros. Ultimately, the Astros signed a release allowing DirecTV to
include the Rockets in the negotiations.
29
these third parties were still hesitant and/or unwilling to get involved in the Debtors bankruptcy
proceedings. FOX, for example, reiterated its unwillingness to do a market deal with the Debtor
while it was in bankruptcy.
60.
On or around January 6, 2014, Pick sent a letter (the Offer Letter) to Rockets
GP Board Director Brown, in which he reiterated Comcasts intention to bid for the Debtor:
Comcasts position throughout this matter, beginning with the
pleadings it filed for the appointment of a trustee that
accompanied the filing of the involuntary petition, has been
that it is prepared to make a bid to acquire the Network, thus
ensuring that the Network could successfully reorganize in
bankruptcy. Although the passage of time and other events have
affected the valuation, Comcast Owner remains prepared to
make a stalking horse bid for the acquisition of the Network.
[emphasis added].
In the Offer Letter, Pick described that the stalking horse bid would (subject to a reasonable
aggregate cap) satisfy in full all prepetition secured, administrative, priority and general
unsecured claims, including the amounts necessary to cure existing defaults under the Media
Rights Agreements. Notably, in contrast to its prior promises, Comcast was no longer offering to
bid an amount that would result in a material or significant distribution to the Debtors
equity holders.
61.
After receiving the Offer Letter, Rocket Ball and Astros LLC requested
clarification from Comcast regarding certain material terms of Comcasts offer, but never
received any substantive response.24 Contrary to Comcasts later claims, the Rockets Entities
and the Astros Entities considered the Offer Letter in good faith.25
24
Comcasts counsel merely responded with general assurances that Comcast understood that, in order for a plan
to be confirmed, the deal would have to pay all of the Debtors debts and assume all of the Debtors contracts,
and that that was what was intended.
25
And, of course, the Rockets were not authorized at that time to accept any deal on behalf of the Debtor without
the Courts approval.
30
additional explanation from Comcast, which Comcast refused to provide. On information and
belief, Comcast refused to respond to the reasonable requests for clarification because, at the
time Pick sent the Offer Letter, Comcast had no intention of submitting a bid in an amount that
would pay all the Debtors creditors in full.
62.
The same day that they received the Offer Letter, the Rockets filed an emergency
request for an extension of exploratory period under the Amended Negotiations Order. On
January 7, 2014, the Bankruptcy Court entered an order extending the Rockets authority to act
as lead negotiator for the Debtor through February 4, 2014 (the Second Amended Negotiations
Order). Following entry of the Second Amended Negotiations Order, the Rockets continued to
explore strategic opportunities for the Debtor.
63.
terminate exclusivity and appoint an examiner, in which they stated: Comcast remains prepared
to serve as a stalking-horse bidder, and is prepared to acquire the Network, and thus permit the
Network successfully to reorganize in bankruptcy.
64.
On February 3, 2014 (the day before the Second Amended Negotiations Order
was set to expire), the Rockets learned that an agreement with a third-party (i.e., DirecTV and
AT&T) would not be possible. During their negotiations with DirecTV and AT&T, the Rockets
had been clear that any deal with them would have to be better than what had been publicly
promised by Comcast. This is because, unlike a deal with Comcast, a deal with a third party
would necessarily involve the added hassle and expense of transitioning to a brand new owner.
On February 3, DirecTV and AT&T informed the Rockets that while they were interested in
doing deal on the same terms that Comcast had promised (in exchange for all or substantially all
of the equity of the Debtor), they were not willing to exceed Comcasts terms. Given that the
31
terms were no better than Comcasts, the Rockets, on behalf of the Debtor, felt that it would not
make sense for the Debtor to pursue such a deal. On February 4, 2014, at the continued hearing
on the motion to dismiss, Brown advised the Bankruptcy Court of the foregoing and noted that
the only remaining offer on the table was Comcasts.
65.
At that same hearing, the Bankruptcy Court asked Comcasts counsel, Goldblatt,
whether, if an order for relief was entered, the two Comcast GP Board Directors (Litner and
Ruth) would perform as fiduciaries to the Debtor and its Estate. In response, Goldblatt stated:
Your Honor, our answer to that question is yes. We believe that, as
a matter of federal bankruptcy law and policy, individuals who, as
a matter of non-bankruptcy or corporate law, exercise control over
the affairs of a Debtor-in-possession, whether directly or indirectly,
through the structure, have, if not by non-bankruptcy, then by
implication, by from bankruptcy law, the duty to act in the best
interests of the Bankruptcy Estate.
Goldblatt also reaffirmed, on the record, that Comcast believes that the Network can survive as
a going concern, and is prepared to back that belief with a financial commitment.
E.
the Bankruptcy Court orally issued preliminary findings of fact and conclusions of law, including
that an order for relief would be entered against the Debtor.
Commencement Date), an order for relief and case management order was issued against the
Debtor (the Order for Relief). On February 12, the Court entered its Memorandum Opinion,
which set forth its written findings of fact and conclusions of law relating to the Order for Relief.
67.
The Court determined that the requirements of 11 U.S.C. 303 had been met. In
particular, 303 requires that an involuntary petition be supported by at least three petitioning
creditors holding claims not subject to bona fide dispute. Notably, the Court held that, of the
32
four Comcast Petitioning Creditors, only two (i.e., Comcast Services and Comcast Lender)
properly qualified as petitioning creditors. Thus, without the joinder of the Rockets Petitioning
Creditors (which led to the joinder of HP Fannin), there would not have been a sufficient number
of petitioning creditors to allow the Court to enter the Order for Relief. Brown, the Rockets GP
Board Director and CEO of both of the Rockets Petitioning Creditors, and Rafael Stone, the
Rockets general counsel, relied on Comcasts repeated representations that it (or one of its
affiliates) would purchase the Debtor in bankruptcy in an amount sufficient to pay all prepetition
claims, administrative expenses, and return a significant amount of equity to the Partners.
Without such assurances from Comcast, the Rockets Petitioning Creditors would have never
supported the Petition. And without the support of the Rockets Petitioning Creditors, HP Fannin
would not have supported the Petition either.
68.
Additionally, in deciding to enter the Order for Relief, the Bankruptcy Court
noted that, under 303, it was required to grant relief to an involuntary petition unless it is
timely contested by the Debtor . . . . [and] [t]here ha[d] been no timely contest by the Debtor.
But, in fact, it was Comcasts misrepresentations that induced the Debtor to refrain from moving
to dismiss the Petition. Based on its own governance provisions, the Debtor could not have
objected to the Petition without the consent of the Rockets GP Board Director. The Debtor is
controlled by the General Partner, which in turn is controlled by the GP Board. Pursuant to 5.8
and 5.9 of the LLC Agreement, the affirmative vote of a majority of Directors entitled to vote
was required in order for the Debtor to file a motion to dismiss the Petition. The two Comcast
representatives would not have been entitled to vote, as they were Conflicted Directors pursuant
to 5.8. Thus, the affirmative vote of both the Astros GP Board Director (Kibbe) and the
Rockets GP Board Director (Brown) would have been required in order for the Debtor to be able
33
to take such an action. And in reliance on Comcasts misrepresentations, Brown chose not to
oppose the Petition and instead caused the Rockets Petitioning Creditors to join the Petition.
F.
Comcast shows its true colors once the Order for Relief is entered.
69.
As soon as Comcast got what it wanted (i.e. the Order for Relief), it suddenly
became very quiet with respect to its proposed acquisition of the Debtor. When the Rockets and
the Astros reached out to Comcast to get specifics, Comcast became evasive. It ignored the
Rockets and the Astros requests for additional information and, as a stall tactic, instructed them
that the Debtor would need to hire its own counsel before Comcast could move any further with
the deal. The Debtor hired its own bankruptcy counsel on or around February 25, 2014. The
Debtors counsel continued the effort to finalize the deal with Comcast. But Comcast continued
to stall. This continued for approximately six weeks.
70.
DirecTV and AT&T about their potential carriage of CSN Houston. On information and belief,
Bond undertook these discussions in order to acquire confidential information regarding the
Debtor to be used for the benefit of Comcast and to the detriment of the Debtor. DirecTV
informed Bond that the proposed rate card was ten times too high and that they were not going to
pay anywhere near what the Debtor was asking for carriage. Such information was property of
the Debtor, which Bond and Comcast Services/NBCU were obligated to provide to the Debtor
pursuant to the Comcast Services Agreement. See Ex. A, Comcast Services Agreement at 2.5.
But Bond did not inform the Debtor or the GP Board about his discussions with DirecTV. Bond
did, however, provide this information to certain individuals at NBCU, including, on information
and belief, Litner and Ruth. On information and belief, Litner and Ruth immediately passed this
34
information along to Comcast Lender (or directed others to do so), while withholding such
information from the Rockets and Astros GP Board Directors.
71.
Then, on March 17, 2014, a mere six weeks after the Order for Relief was
entered, the Comcast Petitioning Creditors publicly filed a statement with the Bankruptcy Court
declaring that Comcast was no longer interested in acquiring the Debtor or its assets (the
Notice).26 They stated:
Comcast initiated this bankruptcy proceeding in the belief that the
chapter 11 process would permit the Network to reorganize, thus
preserving the Networks value and the jobs of many employees.
Much has happened, however, in the nearly six months since
this involuntary case was filed. In view of these developments,
Comcast is no longer prepared to purchase the Network.
Comcast remains open to considering any proposal by the Debtor
for reorganizing the Network successfully in chapter 11, including
through an auction or through further efforts to obtain additional
carriage. [emphasis added].
Unsurprisingly, the news of Comcasts Notice spread quickly. The same day the Notice was
filed, the Houston Chronicle ran an article titled Comcast wont purchase struggling CSN,
which quoted the Notice in its entirety. See 3/17/14 Houston Chronicle Article, attached hereto
as Exhibit B. On information and belief, most, if not all, of the MVPDs in the industry heard
about the Notice.
72.
But contrary to the statements made in the Notice, there had been no material
change in the Debtors finances or circumstances between February 4, when Comcast last
publicly reiterated its intention to bid on the Debtor, and March 17, when the Comcast
Petitioning Creditors filed the Notice.27 Nor had the Debtors finances or circumstances changed
26
Notably, filing the Notice publicly was entirely inconsistent with Comcasts prior behavior during the
bankruptcy, when it regularly filed pleadings and other documents under seal.
27
The only arguably new piece of information obtained by Comcast during this time period was the information
related to Bonds discussion with DirecTV. Even if this conversation could be considered a material change in
35
materially in the previous six months, other than as a result of the Comcast Petitioning Creditors
placing it into bankruptcy and publicly promising to bid on the Debtor.
73.
Indeed, on information and belief, at the time the Notice was filed, Comcast still
had every intention of purchasing the Debtor (or substantially all of its assets), just not at the
price it had previously promised. And it did not want to have any competition driving up the
price. On information and belief, by filing the Notice publicly, Comcast was intentionally
sending a false message to potential third-party purchasers that it was no longer interested in
purchasing the Debtor because, in Comcasts view, the Debtor had little to no value. As Comcast
was intimately involved with the Debtor, a reasonable potential purchaser would believe that
Comcast had superior knowledge regarding the Debtors value. Thus, on information and belief,
the purpose of the Notice was to chill any outside interest in the Debtor, so that the Debtor would
have no choice but to sell itself, or substantially all of its assets, to Comcast at whatever low
price Comcast was willing to pay.
74.
Now aware of Comcasts true intentions, the Rockets and the Astros began the
search for new purchasers as soon as they received the Notice. They reached out to, and engaged
in extensive discussions with, several counterparties in an effort to develop a transaction to
successfully restructure the Debtor.
75.
Meanwhile, from early February to mid-April, Litner and Ruth still had not
informed the GP Board about Bonds discussions with DirecTV. In early April 2014, at the
insistence of the Astros and the Rockets, Debtors counsel requested that Comcast Services
provide details about what it had done to obtain carriage for the Debtor since the Petition Date.
the Debtors circumstances, Comcast Lender obtained such information unlawfully and in breach of Bonds
contractual duties, and Litners and Ruths fiduciary duties, to the Debtor. Regardless, on information and
belief, Bonds conversation with DirecTV was not the reason Comcast filed the Notice.
36
During the April 10, 2014 GP Board Meeting, the Rockets and the Astros requested that the
Comcast representatives in attendance, including Litner and Ruth, provide these details. On
information and belief, at that time, Litner and Ruth had knowledge of Bonds prior discussions
with DirecTV, yet withheld such knowledge from the GP Board. Moreover, in response to the
Rockets and the Astros questions, Goldblatt, Comcasts counsel, indicated that Comcast
Services had not engaged in any efforts on behalf of the Debtor to solicit potential carriage deals
because the Debtor had not requested that Comcast Services do so. Goldblatt did, however,
agree to make Bond available to the GP Board to provide a general discussion on the carriage
market.
76.
On April 15, Bond presented the GP Board with an update on current carriage
market conditions. It was at this meeting that Bond first informed the Rockets and Astros GP
Board Directors of his discussions with DirecTV (and AT&T) several months prior. Bond also
acknowledged during this meeting that while the Debtors bankruptcy filing in and of itself was
not fatal [to the Debtors ability to negotiate potential carriage deals with interested parties,] it
indicated instability to operators . . .
77.
Throughout the spring and early summer of 2014, contrary to the statements made
in the Notice, Comcast continued to actively pursue a purchase of the Debtor, or substantially all
of its assets. In late May or early June, Comcasts counsel (Golblatt and Rockford) requested a
call with the Rockets general counsel (Stone) and the Astros general counsel (Kibbe). On that
call, Comcasts counsel proposed an offer that was significantly less than the amount Comcast
had previously represented it would offer. Kibbe immediately dismissed such offer, while Stone
agreed to take the offer under advisement. As a follow-up to that call, on June 2, 2014, Goldblatt
sent a letter to counsel for the Rockets and Astros, enclosing a revised term sheet for Comcasts
37
proposed restructuring of the Debtor. Contrary to its prior representations, Comcasts lowball
bid would not have even paid the Debtors creditors in full,28 let alone made any contribution to
equity. Moreover, Comcast expected the Rockets and Astros to add additional value to the
Debtor by taking significantly less in future media rights payments. Comcast knew that such a
condition was a nonstarter for the Astros and the Rockets, whose consent was necessary for such
a deal to get done. And without a deal, the Debtor would continue to languish in bankruptcy,
incurring more and more debt along the way.
78.
At a GP Board meeting the following day (June 3), Stone acknowledged that the
Rockets had received and were considering Comcasts offer to purchase the Debtor. Stone also
noted that the Rockets and the Astros were considering other options for the Debtor. Indeed, the
Rockets and the Astros were then in discussions with DIRECTV, LLC (DTV) and AT&T
Services, Inc. (AT&T) regarding a potential reorganization of the Debtor.29
79.
Ultimately, the Debtor, Rocket Ball, and Astros LLC (the Proponents) were
able to reach a deal with DTV and AT&T (the DTV/AT&T Deal), who each agreed to execute
an affiliation agreement, subject to AT&T Teleholdings, Inc. (AT&T Teleholdings) and
DIRECTV Sports Networks, LLC (DTV Sports) collectively receiving 100% of the equity
interests in the Reorganized Debtor.30 The DTV/AT&T Deal was incorporated into a plan of
reorganization for the Debtor, which was approved unanimously by the GP Board. After an
28
For example, under Comcasts proposal, the Astros would not be paid in full for amounts due under the Astros
Media Rights Agreement for the 2014 MLB season.
29
On or around May 18, 2014, AT&T had announced its intent to merge with DirecTV. Believing this proposed
merger might have changed AT&T and/or DirecTVs view on potentially purchasing the Debtor, the Astros
immediately reached out to the CEO of AT&T, flying up to meet with him in Dallas within days of the
announcement. AT&T expressed an interest in a potential acquisition and, from that point on, the Astros and the
Rockets focused primarily on pursuing that deal.
30
The Reorganized Debtor is a new legal entity and is not a successor to the Debtor. As of the Effective Date, the
Debtor, as a legal entity, no longer exists.
38
extensive multi-day confirmation hearing, the Plan of Reorganization was confirmed, despite
Comcasts objection, on October 30, 2014, with an Effective Date of November 17, 2014.
80.
While Comcast may have failed in its ultimate plan to acquire the Assets for itself,
it certainly succeeded in severely damaging the Debtor and its Estate along the way. Comcasts
wrongful conduct put the Debtor in a far worse position than it would have been in otherwise.
Had Comcast lived up to its repeated promises, the Debtors prepetition claims and
administrative expenses would have been paid in full and its equity holders would have received
a significant distribution.31 But instead, under the DTV/AT&T Deal,32 the Debtors unsecured
creditors and equity holders received no money on the Effective Date.33 Additionally, on
information and belief, the terms of the DTV/AT&T Deal were significantly less favorable to the
Debtor than they would have been if Comcast had not publicly filed the Notice.34 In fact, the
DTV/AT&T Deal provided less value to the Debtors Estate than the Debtor would have received
if it had just liquidated (or sold all of its assets) in September 2013. Under either scenario the
Debtor would have lost the Assets and ceased to exist. But in September 2013, the Debtor had
significantly less debt than it did at the time the Plan of Reorganization was confirmed. Instead,
31
Even Comcasts reduced offer on January 6, 2014, while not including a distribution to equity holders, promised
to pay all the Debtors creditors in full.
32
Because of Comcasts wrongful conduct, by the late summer/fall of 2014, the DTV/AT&T Deal was the best
possible deal available to the Debtor. It was certainly superior to Comcasts lowball offer from June 2014,
especially given Comcasts unreasonable conditions related to the reduction of the Astros and the Rockets
media rights fees which foreclosed any reasonable prospect for a reorganization of the Debtor under such a
proposal.
33
Instead, under the Plan, the Debtors unsecured creditors and equity holders became holders of beneficial
interests in the HRSN Litigation Trust. The only assets owned by the HRSN Litigation Trust are certain
Transferred Causes of Action of the Debtor, including the causes of actions asserted herein. Thus, the claims of
the Debtors unsecured creditors and equity holders will only be paid if and to the extent that the HRSN
Litigation Trust is successful in prosecuting the Transferred Causes of Action.
34
On February 3, 2014, DirecTV and AT&T had expressed their interest in doing a deal on the same terms as
those promised by Comcast. Just a few months later, after the Notice was filed, the proposed terms of the new
DTV/AT&T Deal were significantly less favorable to the Debtor.
39
the prolonged bankruptcy proceedings, resulting from Comcasts wrongful conduct, caused the
Debtors Estate to incur a substantial amount of additional debt and increased the exposure of the
Debtors creditors.
Causes of Action
Count 1 - Fraudulent Misrepresentation
81.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Media, Comcast California, Comcast Corp., Comcast Partner, and Pick for common
law fraudulent misrepresentation.
83.
From late September 2013 until January 6, 2014, Defendants35 falsely represented
to the Debtor, on at least four separate occasions, that Comcast Lender (or some other Comcast
entity) would bid on and/or purchase the Debtor, or substantially all of its assets, in bankruptcy
in an amount sufficient to (i) satisfy all prepetition claims and administrative expenses in full,
and (ii) return a significant or material amount of equity to the Partners. From January 6,
2014 through February 4, 2014, Defendants falsely represented to the Debtor that Comcast
Lender (or some other Comcast entity) would bid on and/or purchase the Debtor, or substantially
all of its assets, in bankruptcy in an amount sufficient to satisfy in full all prepetition secured,
administrative, priority, and general unsecured claims, including the amounts necessary to cure
the existing defaults under the Media Rights Agreements.
35
For ease of reference, the term Defendants as used in each separate Count will mean the specific Comcast
Defendants identified under such Count.
40
84.
Defendants also made these misrepresentations to the GP Board, the Astros, and
the Rockets, with the intent or expectation that such misrepresentations would be repeated to the
Debtor.
85.
nature that a reasonable person, such as the Debtor, would attach importance to and be induced
to act, or refrain from acting, on such information in determining whether to seek to dismiss, or
otherwise contest, the Petition.
86.
made by Defendants while purporting to have special knowledge regarding those future events
and/or with the knowledge that such representations were false.
Defendants were sufficiently certain and of the type that a person such as the Debtor could
reasonably and justifiably rely on them. Defendants had no intention of performing when they
made the promises.
statements of fact, false statements of opinion, and/or false representations by conduct, including
silence and deceptive conduct. Defendants knew such misrepresentations were false at the time
they were made, supported such misrepresentations with false statements of fact, and/or knew
that the Debtor would justifiably rely on such misrepresentations because of Defendants special
knowledge.
88.
41
89.
refrained from contesting or seeking to dismiss the Petition. Additionally, the Rockets GP Board
Director, acting on behalf of the Debtor (as well as the Rockets), actually and justifiably relied
on the misrepresentations when he took actions to support the Petition, including but not limited
to, causing the Rockets Petitioning Creditors to formally join the Petition, which in turn caused
HP Fannin to formally join the Petition.
90.
The Debtors reliance was to its detriment. By the Debtor not contesting the
Petition, the Bankruptcy Court entered the Order for Relief. Prior to the bankruptcy, the Debtor
owned the Assets, which had significant value. Because of the bankruptcy proceedings, the
value of the Debtor decreased and the Debtor lost opportunities to (i) restructure or reorganize
itself such that it could maintain its Assets and run a profitable business, (ii) sell such Assets for
an amount sufficient to fully satisfy the claims of its creditors and provide a distribution to its
equity owners, or (iii) dissolve in order to prevent further harm to the Debtors creditors.
Ultimately, as a result of the Plan of Reorganization, the Debtor no longer exists and its Assets
now belong to AT&T Teleholding and DTV Sports. The amount received by the Debtors Estate
through the AT&T/DTV Deal was significantly less than the pre-bankruptcy value of the Assets
and was insufficient to pay any of the claims of the Debtors unsecured creditors or to provide
any distribution to the equity owners. The amount received by the Debtors Estate through the
AT&T/DTV Deal was also significantly less than the proposed purchase price promised by
Defendants. Additionally, the Debtor incurred debts, fees, and expenses that it would not have
incurred if it had not been placed into bankruptcy, including, but not limited to, hundreds of
millions of dollars in additional media rights payments owed to the Astros and the Rockets.
42
91.
Debtor and its Estate, resulting in damages that exceed the minimum jurisdictional limits of the
Court, and for which Plaintiff herein sues. These damages include, but are not limited to, actual
damages, consequential damages, incidental damages, compensatory damages, out-of-pocket
damages, benefit-of-the-bargain damages, lost profits, loss of sales, loss of credit and/or
investment, loss of business reputation and goodwill, loss of business, mitigation expenses
and/or increased business expenses, exemplary damages, costs of court, prejudgment interest,
and post-judgment interest.
Count 2 - Fraud by Nondisclosure
92.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Lender, Comcast Services, Comcast Media, Comcast California, Comcast Corp.,
Comcast Partner, Pick, Bond, Litner, and Ruth for common law fraud by nondisclosure.
94.
From late September 2013 until March 17, 2014, Defendants concealed or failed
to disclose material facts to the Debtor relating to Comcasts intention of purchasing the Debtor,
or substantially all of its assets, in bankruptcy at a particular price. Prior to the Commencement
Date, Defendants knew that Comcast had no intention of submitting a bid for the Debtor, or
substantially all of its assets, at the price it had publicly promised. This information was material
in that it was of a nature that a reasonable person, such as the Debtor, would attach importance to
and be induced to act, or refrain from acting, on such information in determining whether to seek
to dismiss, or otherwise contest, the Petition. Defendants had a duty to disclose such information
to the Debtor because (i) the information was new, and it made Defendants earlier
representations to the Debtor false or misleading, (ii) Defendants partially disclosed the
43
information to the Debtor, which created a substantially false impression, and/or (iii) Defendants
voluntarily disclosed some of the information to the Debtor. Defendants Litner and Ruth also
had a duty to disclose such information to the Debtor because as early as the Petition Date (but in
no event later than the Commencement Date) they owed a fiduciary duty to the Debtor.
95.
Services, and NBCU concealed or failed to disclose material facts to the Debtor regarding
Bonds conversations with DirecTV. Defendants knew that (i) Bond had spoken with DirecTV in
February 2014 regarding carriage of CSN Houston, (ii) DirecTV had told Bond that it had no
interest in carrying CSN Houston because the rate card was too high by a factor of ten, and (iii)
the Debtor was not aware that such discussions had taken place or of the substance of such
conversations. Defendants concealed or failed to disclose such information to the Debtor. This
information was material in that it was of a nature that a reasonable person, such as the Debtor,
would attach importance to and be induced to act, or refrain from acting, on such information in
determining whether to pursue potential restructuring opportunities with Comcast or other third
parties. Defendants Litner and Ruth had a duty to disclose the information to the Debtor because
as early as the Petition Date (but in no event later than the Commencement Date) they owed a
fiduciary duty to the Debtor. Defendants Comcast Services, NBCU, and Bond had a duty to
disclose the information to the Debtor pursuant to the Comcast Services Agreement. Defendants
also had a duty to disclose such information to the Debtor because (i) the information was new,
and it made their earlier representations to the Debtor false or misleading, (ii) they partially
disclosed the information to the Debtor, which created a substantially false impression, and/or
(iii) they voluntarily disclosed some of the information to the Debtor.
44
96.
Defendants knew that the Debtor was ignorant of the concealed information and
Defendants deliberately remained silent and did not disclose the information to
the Debtor. By deliberately remaining silent, Defendants intended for the Debtor to act without
the information.
98.
reliance was to its detriment. By the Debtor not contesting the Petition, the Bankruptcy Court
entered the Order for Relief. Prior to the bankruptcy, the Debtor owned the Assets, which had
significant value. Because of the bankruptcy proceedings, the value of the Debtor decreased and
the Debtor lost opportunities to (i) restructure or reorganize itself such that it could maintain its
Assets and run a profitable business, (ii) sell such Assets for an amount sufficient to fully satisfy
the claims of its creditors and provide a distribution to its equity owners, or (iii) dissolve in order
to prevent further harm to the Debtors creditors.
Reorganization, the Debtor no longer exists and its Assets now belong to AT&T Teleholding and
DTV Sports. The amount received by the Debtors Estate through the AT&T/DTV Deal was
significantly less than the pre-bankruptcy value of the Assets and was insufficient to pay any of
the claims of the Debtors unsecured creditors or to provide any distribution to the equity
owners. The amount received by the Debtors Estate through the AT&T/DTV Deal was also
significantly less than the proposed purchase price promised by Defendants. Additionally, the
Debtor incurred debts, fees and expenses that it would not have incurred if it had not been placed
into bankruptcy, including, but not limited to, hundreds of millions of dollars in additional media
rights payments owed to the Astros and the Rockets.
45
99.
conversations with DirecTV were material to the Debtor or to Comcasts decision on whether to
purchase the Debtor, the Debtor relied on the concealment of such information to its detriment.
Believing Comcasts promises, the Debtor chose to negotiate a potential deal with Comcast
instead of a potential deal with DirecTV and AT&T on the same terms. If the Debtor had been
told such information at the time it occurred (February 2014), the Debtor could have re-opened
negotiations with DirecTV and AT&T sooner (prior to Comcast filing the Notice) and potentially
obtained better terms than those the Debtor ultimately obtained in the final DTV/AT&T Deal.
100.
injury to the Debtor and its Estate, resulting in damages that exceed the minimum jurisdictional
limits of the Court, and for which Plaintiff herein sues. These damages include, but are not
limited to, actual damages, consequential damages, incidental damages, compensatory damages,
out-of-pocket damages, benefit-of-the-bargain damages, lost profits, loss of sales, loss of credit
and/or investment, loss of business reputation and goodwill, loss of business, mitigation
expenses and/or increased business expenses, exemplary damages, costs of court, prejudgment
interest, and post-judgment interest.
Count 3 Business Disparagement
101.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Lender, Comcast Services, Comcast Media, and Comcast California for business
disparagement.
103.
the Debtors value and/or financial position. In the Notice, Defendants stated: Comcast initiated
46
this bankruptcy proceeding in the belief that the chapter 11 process would permit the Network to
reorganize, thus preserving the Networks value and the jobs of many employees. Much has
happened, however, in the nearly six months since this involuntary case was filed. In view of
these developments, Comcast is no longer prepared to purchase the Network.
104.
The disparaging and false statements contained in the Notice cast serious doubt on
The statements in the Notice were false because, at the time the Notice was filed,
(i) Comcast still intended on purchasing the Debtor, (ii) the Debtor had significant value, and (iii)
there had been no material changes in the Debtors circumstances to justify Comcasts apparent
reversal on its decision to purchase the Debtor.
106.
The statements in the Notice were seen by and/or published to all persons and
entities that had made an appearance in the bankruptcy proceedings and/or had requested notice
of pleadings filed in the bankruptcy proceedings. The statements in the Notice were also
published to the general public, as the Notice was publicly filed on the Courts docket and was
available for anyone to view (including various third-party MVPDs that were following the
bankruptcy proceedings carefully). Additionally, the statements in the Notice were re-published
to the public by the Houston Chronicle. A reasonable person would recognize that Defendants
actions created an unreasonable risk that the disparaging statements would be communicated to
47
other parties. And, in fact, a number of MVPDs, including but not limited to, AT&T and
DirecTV confirmed to the Rockets that they had in fact seen the Notice.
107.
Defendants published the statements with malice because they: (i) knew the
statements were false; (ii) acted with reckless disregard for whether the statement was true; (3)
acted with ill will; and/or (iv) intended to interfere with the Debtors economic interests.
108.
109.
parties not to deal with the Debtor, causing actual, consequential, incidental, compensatory, and
special damages to the Debtor and its Estate in an amount that exceeds the minimum
jurisdictional limits of the Court, and for which Plaintiff herein sues. These damages include,
but are not limited to, loss of sales, loss of credit and/or investment, loss of business reputation
and goodwill, loss of business, mitigation expenses and/or increased business expenses,
exemplary damages, costs of court, prejudgment interest, and post-judgment interest.
Count 4 Tortious Interference with Prospective Business Relations
110.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Lender, Comcast Services, Comcast Media, Comcast California, Comcast Corp.,
Comcast Partner, and Pick for tortious interference with prospective business relations.
112.
Both prior to and after the Petition was filed, the Debtor engaged in discussions
with certain third parties, including MVPDs and potential investors/purchasers, regarding a
potential purchase or restructuring of the Debtor.
113.
There was a reasonable probability the Debtor would have entered into contracts
and/or business relationships with one or more of these third parties if Defendants had not (i)
48
filed the Petition, (ii) publicly announced Comcasts intention to purchase the Debtor, or
substantially all of its assets, for a particular price, (iii) obtained an Order for Relief from the
Bankruptcy Court based on false pretenses, and/or (iv) publicly filed the Notice. The bankruptcy
filing, along with Comcasts involvement and public interest in the Debtor, chilled interest and
alternative opportunities because these potential counterparties were aware of Comcasts
supposed interest in the Debtor, Comcast Lenders potential right to credit bid its $100 million
claim, and Comcasts commitment to paying a price that would pay all creditors in full and
provide a material return for equity. Additionally, by filing the Notice, Defendants Comcast
Lender, Comcast Services, Comcast Media, and Comcast California chilled interest and
alternative opportunities because these potential counterparties reasonably interpreted the Notice
as a determination by Comcast that the Debtor had little to no value. Moreover, there are not
many MVPDs competing in this space,36 so when one MVPD (i.e., Comcast) publicly withdraws
itself from the running, as Comcast did by filing the Notice, it changes the economics for
everyone. The Debtor would have been able to negotiate more favorable terms with the other
MVPDs if Comcast had not publicly stated that it was no longer interested in purchasing the
Debtor and implied that the Debtor had little to no value.
114.
third parties and intentionally interfered with those relationships through their actions as
delineated above.
115.
of the effect such conduct had on the Debtors prospective business relationships with these third
36
It was critical that any deal the Debtor negotiated included carriage of CSN Houston. There are only a few
MVPDs in the industry that could provide such carriage (e.g., Comcast, AT&T, DirecTV, DISH Network).
49
parties. In particular, Defendants conduct was fraudulent and disparaging, as set forth in the
paragraphs above.
116.
Defendants interference proximately caused injury to the Debtor and its Estate,
resulting in damages that exceed the minimum jurisdictional limits of the Court, and for which
Plaintiff herein sues.
These damages include, but are not limited to, actual damages,
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Lender, Comcast Services, Comcast Media, Comcast California, Comcast Corp.,
Comcast Partner, and Pick for promissory estoppel.
119.
From late September 2013 until January 6, 2014, Defendants repeatedly promised
the Debtor that Comcast Lender (or some other Comcast entity) would bid on and/or purchase
the Debtor, or substantially all of its assets, in bankruptcy in an amount sufficient to (i) satisfy all
prepetition claims and administrative expenses in full, and (ii) return a significant or material
amount of equity to the Partners. From January 6, 2014 through February 4, 2014, Defendants
promised the Debtor that Comcast Lender (or some other Comcast entity) would bid on and/or
purchase the Debtor, or substantially all of its assets, in bankruptcy in an amount sufficient to
satisfy in full all prepetition secured, administrative, priority, and general unsecured claims,
50
including the amounts necessary to cure the existing defaults under the Media Rights
Agreements.
120.
seeking to dismiss the Petition. Because of the nature of the promise, the Debtors reliance was
both reasonable and substantial. The Debtors reliance was to its detriment. By the Debtor not
contesting the Petition, the Bankruptcy Court entered the Order for Relief.
bankruptcy, the Debtor owned the Assets, which had significant value.
Prior to the
Because of the
bankruptcy proceedings, the value of the Debtor decreased and the Debtor lost opportunities to
(i) restructure or reorganize itself such that it could maintain its Assets and run a profitable
business, (ii) sell such Assets for an amount sufficient to fully satisfy the claims of its creditors
and provide a distribution to its equity owners, or (iii) dissolve in order to prevent further harm to
the Debtors creditors. Ultimately, as a result of the Plan of Reorganization, the Debtor no longer
exists and its Assets now belong to AT&T Teleholding and DTV Sports. The amount received by
the Debtors Estate through the AT&T/DTV Deal was significantly less than the pre-bankruptcy
value of the Assets and was insufficient to pay any of the claims of the Debtors unsecured
creditors or to provide any distribution to the equity owners. Additionally, the Debtor incurred
debts, fees and expenses that it would not have incurred if it had not been placed into bankruptcy,
including, but not limited to, hundreds of millions of dollars in additional media rights payments
owed to the Astros and the Rockets.
121.
Defendants knew, or reasonably should have known, that the Debtor would rely
on Defendants promises.
122.
51
123.
The Debtors reliance on Defendants promise resulted in injury to the Debtor and
its Estate, resulting in damages that exceed the minimum jurisdictional limits of the Court, and
for which Plaintiff herein sues. These damages include, but are not limited to, actual damages,
out-of-pocket damages, reliance damages, costs of court, prejudgment interest, post-judgment
interest, and attorneys fees.
Count 6 Breach of Fiduciary Duty
124.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Defendants had a fiduciary relationship with the Debtor as early as the Petition
Date (but in no event later than the Commencement Date). Pursuant to federal bankruptcy law
(including, but not limited to, 11 U.S.C. 704, 1106-1107 and Local Bankruptcy Rule 4002-1),
Defendants, as GP Board Directors, owed fiduciary duties to the Debtor and its Estate.
Additionally and/or alternatively, by causing Comcast Services and Comcast California to file
the Petition and by affirmatively confirming to the Debtor and the Bankruptcy Court that they
owed fiduciary duties to the Debtor and its Estate, Defendants voluntarily assumed a fiduciary
duty such that the Debtor was justified in relying on Defendants to act in the best interests of the
Debtor and its Estate.
127.
Defendants breached their fiduciary duties to the Debtor and its Estate by
concealing or failing to disclose material facts to the Debtor regarding Bonds conversations with
DirecTV. Defendants were in possession of material confidential information with respect to the
Debtors inability to obtain additional carriage with DirecTV which they did not share with the
non-Comcast GP Board Directors. Additionally, Defendants breached their fiduciary duties to
52
the Debtor and its Estate by disclosing, or causing the disclosure of, such material confidential
information (which was the Debtors property) to Comcast affiliates for Comcast to use to the
detriment of the Debtor.
128.
By such actions, Defendants: (i) failed to make full and fair disclosure of
important information to the Debtor; (ii) failed to act with loyalty (iii) failed to act in good faith;
(iv) failed to act with integrity of the strictest kind; (v) failed to act with utmost candor; (vi)
failed to act in the best interests of the Debtor and its Estate; (vii) failed to act to promote the
Debtors long-term profitable operation; (viii) engaged in self-dealing; (ix) placed the interests of
Comcast above the interests of the Debtor and its Estate; and/or (x) failed to act with due care.
Defendants actions were fraudulent, intentional, reckless, malicious, in bad faith, and/or grossly
negligent.
129.
Defendants breaches of fiduciary duty injured the Debtor and its Estate, resulting
in damages that exceed the minimum jurisdictional limits of the Court, and for which Plaintiff
herein sues. These damages include, but are not limited to, actual damages, consequential
damages, incidental damages, compensatory damages, out-of-pocket damages, benefit-of-thebargain damages, lost profits, loss of sales, loss of credit and/or investment, loss of business
reputation and goodwill, loss of business, mitigation expenses and/or increased business
expenses, exemplary damages, costs of court, prejudgment interest, and post-judgment interest.
130.
fiduciary duty. Accordingly, Plaintiff seeks the return, disgorgement, and/or forfeiture of, and/or
a constructive trust upon, all funds, profits, fees, and benefits that Defendants realized, received,
or obtained as a result of their breaches of fiduciary duty.
53
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
Comcast Services and NBCU for breach of the Comcast Services Agreement.
133.
On October 29, 2010, the Debtor and Comcast Services executed the Comcast
Services Agreement, which was a valid and enforceable written contract. The Comcast Services
Agreement provided that Comcast Services would provide management oversight and certain
enumerated operational services (including affiliate sales services, affiliate finance services,
executive oversight services, operations and engineering, business and legal affairs services, as
well as certain other services), identification of prospective MVPDs, and negotiation of
distribution agreements with MVPDs interested in carrying and eligible to distribute CSN
Houston, and, in return, the Debtor agreed to pay $5 million annually to Comcast Services
(subject to certain increases or decreases as provided in the agreement) along with all reasonable
out-of-pocket costs.
134.
The Comcast Services Agreement remained in effect until the Effective Date, at
The Debtor fully performed its contractual obligations under the Comcast
Services Agreement.
136.
under the Comcast Services Agreement. Additionally and/or alternatively, NBCU was acting as
Comcast Services agent when it provided, or failed to provide, services to the Debtor pursuant to
the Comcast Services Agreement.
54
137.
breached 2.2(e) and 2.4 of the Comcast Services Agreement by (i) failing to consider the
Debtors concerns in good faith, (ii) failing to provide services to the Debtor in a manner that
was, under the circumstances, at a minimum, consistent in all material respects with . . . the
same highest level and quality of service that Comcast [Services] uses when providing similar
services to any other Comcast-Related RSN[,] (iii) improperly basing their allocation of time,
personnel and resources to the Debtor on the amount or nature of Comcasts ownership
interest in the Debtor; and/or (iv) failing to use commercially reasonable efforts to obtain for
[the Debtor] the best pricing, benefits and other terms available to [the Debtor] under the
circumstances[.]
138.
Agreement by (i) failing to engage in negotiations with MVPDs to obtain additional carriage for
the Debtor between the Commencement Date and the Effective Date, notwithstanding their
contractual obligation to do so, (ii) failing to disclose to the Debtor confidential information
obtained by Defendants in connection with their provision of services under the Comcast
Services Agreement, and (iii) withholding, and/or delaying the provision of, the Debtors records
and documents in order to impede the Debtors negotiations with third parties.
139.
Debtor and its Estate, resulting in damages that exceed the minimum jurisdictional limits of the
Court, and for which Plaintiff herein sues. These damages include, but are not limited to, actual
damages, consequential damages, incidental damages, compensatory damages, nominal
damages, out-of-pocket damages, benefit-of-the-bargain damages, restitution damages, loss of
sales, loss of credit and/or investment, mitigation expenses and/or increased business expenses,
55
All conditions precedent to Plaintiffs claim for relief have been performed or
have occurred.
Count 8 Vicarious Liability (Agency, Respondeat Superior, Ratification, VicePrincipal Liability)
141.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
the wrongful acts and omissions of their agents, employees, and representatives (whether
defendants or non-defendants), as alleged herein, under the doctrines of agency (authorized
agency, apparent agency, ostensible agency, and agency by estoppel), respondeat superior,
ratification, and/or vice-principal liability.
wrongful acts and omissions of Defendants Comcast Services, Comcast Cable, Comcast Lender,
Comcast Partner, Comcast Media, Comcast California, NBCU, Litner, Ruth, Bond, and Pick. At
all times relevant herein, Defendants Comcast Services, Comcast Cable, Comcast Lender,
Comcast Partner, Comcast Media, Comcast California, NBCU, Litner, Ruth, Bond, and Pick (i)
were agents, employees, and/or vice-principals of Defendant Comcast Corp., and, (ii) were
56
acting within their general authority as agents, employees, and/or vice-principals of Comcast
Corp. in furtherance of Comcast Corp.s business and for the accomplishment of the object for
which such agent, employee, or vice-principal was hired.
144.
wrongful acts and omissions of Defendants NBCU, Litner, Ruth, and Bond. At all times relevant
herein, Defendants NBCU, Litner, Ruth, and Bond (i) were agents, employees, and/or viceprincipals of Defendant Comcast Services, and (ii) were acting within their general authority as
agents, employees, and/or vice-principals of Comcast Services in furtherance of Comcast
Services business and for the accomplishment of the object for which such agent, employee, or
vice-principal was hired.
145.
wrongful acts and omissions of Defendant Pick. At all times relevant herein, Defendant Pick (i)
was an agent, employee, and/or vice-principal of Defendant Comcast Lender, and (ii) was acting
within his general authority as agent, employee, and/or vice-principal of Comcast Lender in
furtherance of Comcast Lenders business and for the accomplishment of the object for which he
was hired.
146.
wrongful acts and omissions of Defendants Litner, Ruth, and Pick. At all times relevant herein,
Defendants Litner, Ruth, and Pick (i) were agents, employees, and/or vice-principals of
Defendant Comcast Partner, and, (ii) were acting within their general authority as agents,
employees, and/or vice-principals of Comcast Partner in furtherance of Comcast Partners
business and for the accomplishment of the object for which such agent, employee, or viceprincipal was hired.
57
147.
Defendants Litner, Ruth, and Bond (i) were agents, employees, and/or vice-principals of
Defendant NBCU, and, (ii) were acting within their general authority as agents, employees,
and/or vice-principals of NBCU in furtherance of NBCUs business and for the accomplishment
of the object for which such agent, employee, or vice-principal was hired.
Count 9 Aiding & Abetting
148.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
California, Comcast Corp., Comcast Partner, NBCU, Pick, Bond, Litner, and Ruth committed
tort(s) against the Debtor, as set forth in the factual allegations and causes of action detailed
above, including, but not limited to, fraud, business disparagement, tortious interference with
prospective relations, and breach of fiduciary duty. With respect to each tort for which a
particular Comcast Defendant was a primary actor, the other Comcast Defendant(s) knew that
such primary actors conduct constituted tort(s). With the intent to assist the primary actor in the
tort(s), the other Comcast Defendant(s) substantially assisted and/or encouraged the primary
actor. The other Comcast Defendant(s) assistance or encouragement was a substantial factor in
causing the tort(s). Therefore, all of the Comcast Defendants are considered joint tortfeasors and
are responsible for the consequences of the tort(s), including joint and several liability for the
damages suffered by the Debtor and its Estate as described herein.
Additionally and/or
alternatively, Plaintiff seeks the return, disgorgement, and/or forfeiture of, and/or a constructive
58
trust upon, all funds, profits, fees, and benefits that each Comcast Defendant realized, received,
or obtained as a result of its participation in and/or benefit from Litners or Ruths breaches of
fiduciary duty.
151.
assisted Comcast Lender, Comcast Services, Comcast Media, Comcast California, Comcast
Corp., Comcast Partner, NBCU, Bond, and/or Pick in causing the tort(s). Litners and Ruths
assistance and participation, separate from the primary actors acts, breached Litners and Ruths
fiduciary duties to the Debtor and its Estate. Litners and Ruths assistance and participation was
a substantial factor in causing the tort(s). Therefore, Litner and Ruth are considered joint
tortfeasors and are responsible for the consequences of the tort(s), including joint and several
liability for the damages suffered by the Debtor and its Estate as described herein. Additionally
and/or alternatively, Plaintiff seeks the return, disgorgement, and/or forfeiture of, and/or a
constructive trust upon, all funds, profits, fees, and benefits that Litner and/or Ruth realized,
received, or obtained as a result of their assistance and/or participation in Comcast Defendants
torts.
Count 10 Conspiracy
152.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
unlawful purpose and/or a lawful purpose by unlawful means, as set forth in the factual
allegations and causes of action detailed above, by financially crippling the Debtor in order for
Comcast to obtain the Assets for itself through fraud, business disparagement, tortious
59
Comcast
Defendants had a meeting of the minds on the object or course of action, acting with the intent to
harm the Debtor.
Defendants committed an unlawful, overt act, including, but not limited to, fraud, business
disparagement, tortious interference with prospective business relations, and/or breach of
fiduciary duty.
155.
The Debtor and its Estate suffered injuries as a proximate result of Comcast
Defendant(s) agreement to financially cripple the Debtor through fraud, business disparagement,
tortious interference with prospective business relations, and/or breach of fiduciary duty.
Therefore, all of the Comcast Defendants are considered joint tortfeasors and are responsible for
the consequences of the tort(s), including joint and several liability for the damages suffered by
the Debtor and its Estate as described herein. Additionally and/or alternatively, Plaintiff seeks
the return, disgorgement, and/or forfeiture of, and/or a constructive trust upon, all funds, profits,
fees, and benefits that each Comcast Defendant realized, received, or obtained as a result of the
conspiracy to breach Litners and Ruths fiduciary duties to the Debtor.
Count 11 Piercing the Corporate Veil
156.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
for the actions and omissions of Defendants Comcast Services, Comcast Lender, Comcast
Partner, Comcast Media, Comcast California, and NBCU (collectively, the Alter Ego
Defendants) under the theory of piercing the corporate veil.
158.
The corporate forms of the Alter Ego Defendants should be disregarded and their
corporate veil should be pierced because (i) they were each organized and operated as mere tools
60
or business conduits (alter egos) of Comcast Corp., (ii) their corporate forms were used by
Comcast Corp. as a sham to perpetrate a fraud on the Debtor, (iii) their corporate forms were
used by Comcast Corp. to evade a legal obligation, (iv) their corporate forms were used by
Comcast Corp. to achieve or perpetrate a monopoly, (v) they were formed by Comcast Corp. to
circumvent statutes, (vi) they were formed by Comcast Corp. to hide a crime or to justify a
wrong, and/or (vii) they were allowed by Comcast Corp. to operate with inadequate capital for
the type of business they were conducting.
159.
directly or indirectly, each of the Alter Ego Defendants. The Alter Ego Defendants were created,
established, and/or operated by Comcast Corp. for the purpose of facilitating its own business
interests and limiting its liability in that effort. On information and belief, at all times relevant
herein, Comcast Corp. exercised complete dominion and control over the Alter Ego Defendants
such that the separateness thereof had ceased and they functioned as a single economic entity.
On information and belief, (i) Comcast Corp. and the Alter Ego Defendants share many of the
same officers, directors, and employees, (ii) Comcast Corp. files consolidated financial
statements for itself and its subsidiaries, including the Alter Ego Defendants, (iii) most of the
Alter Ego Defendants share a principal place of business with Comcast Corp., and (iv) Comcast
Corp. and the Alter Ego Defendants were represented by the same counsel during the Debtors
bankruptcy proceedings. Moreover, Defendants Comcast Lender and Comcast Partner were
created approximately one month before Comcast acquired an interest in the Debtor and, on
information and belief, were created solely to insulate Comcast Corp. from any liability to the
Debtor.
61
160.
Comcast Corp. used the Alter Ego Defendants for the purpose of perpetrating, and
did perpetrate, an actual fraud and/or injustice upon the Debtor for Comcast Corp.s direct
personal benefit by, among other things, causing some or all of the Alter Ego Defendants to file
the Petition against the Debtor and make false representations regarding Comcasts intentions to
purchase the Debtor.
161.
Adherence to the fiction that the Alter Ego Defendants are entities wholly
independent from Comcast Corp. would promote a grave injustice to the Debtor and its Estate.
Count 12 Exemplary Damages
162.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
The wrongful acts and/or omissions of Comcast Defendants described herein were
Plaintiff also seeks exemplary and/or punitive damages from Comcast Defendants
based on the fraudulent, malicious, and/or grossly negligent actions and omissions of their
agents, employees, and/or vice-principals that were taken on behalf of Comcast Defendants, in
the course and duty of their employment of Comcast Defendants, and/or were authorized,
approved, and/or ratified by Comcast Defendants.
Count 13 Attorneys Fees
165.
Plaintiff re-alleges and incorporates the facts and allegations set forth in the
166.
Plaintiff has been required to retain the undersigned counsel and has agreed to pay
them a reasonable fee for their services in prosecuting Plaintiffs claims in this action. Plaintiff
is entitled to recover reasonable and necessary attorney fees under TEX. CIV. PRAC. & REM. CODE
38.001(8) with respect to its claims for promissory estoppel (Count 5) and breach of contract
(Count 7).
Jury Demand
167.
For these reasons, Plaintiff asks that the Court issue citation for Comcast Defendants to
appear and answer, and that Plaintiff be awarded a judgment against Comcast Defendants for the
following:
a.
actual damages;
b.
nominal damages;
c.
exemplary damages;
d.
equitable relief, including but not limited to, fee forfeiture, disgorgement, and/or
constructive trust;
e.
f.
court costs;
g.
h.
any and all other relief, in law and in equity, both special and general, to which
Plaintiff is entitled.
63
Respectfully submitted,
THE LANIER LAW FIRM, P.C.
64
NETWORK, L.P.
Debtor.
TRUST,
Plaintiff,
v.
Defendants.
Chapter 11
EXHIBIT A
TO PLAINTIFFS COMPLAINT
Section 1.1 Defined Terms. All initially capitalized terms used and not otherwise
defined herein shall have the meanings ascribed thereto in Attachment A.
Section 1.2 General Rules of Interpretation. Whenever the context requires, any
pronoun shall include the corresponding masculine, feminine and neuter forms. The words
include, includes and including shall be deemed to be followed by the phrase without
limitation. Except as specifically otherwise provided in this Agreement, a reference to an
Article, Section or Attachment is a reference to an Article or Section of this Agreement or an
Attachment hereto, and the terms hereof, herein, and other like terms refer to this Agreement
as a whole, including the Attachments hereto. The terms Dollars and $ shall mean United
States Dollars.
1
(NY) 05726/377/AGTS/MSA.doc
Section 1.3
Headings and Captions. The division of this Agreement into Articles and
Sections, the insertion of headings and the use of particular words as defined terms are for
convenience of reference only and shall not affect the construction or interpretation of this
Agreement.
ARTICLE 2 - SERVICES
Section 2.1
(a) In accordance with the terms of this Agreement, Comcast shall provide, or
shall cause one or more Comcast Affiliates or its or their subcontractors to provide, to
Network management oversight, and those operational services that are set forth on
Attachment B attached hereto ( the Operational Services and, together with the
management oversight services, the Services). In connection with Comcasts provision of
the Services, Comcast intends to provide, or cause to be provided, to Network programming
content, where available, consistent with the current practices of Comcast and the ComcastRelated RSNs, and to formalize such practices by entering into separate program and content
sharing and license agreements with each of Network and such Comcast-Related RSNs,
respectively, similar to the form of agreement attached hereto as Exhibit 1 (it being
understood that (i) with respect to certain of such Comcast-Related RSNs, the form of such
agreement, and certain decisions arising thereunder (including whether such Comcast-Related
RSN elects to participate in the content sharing pool contemplated in such agreement), may
be subject to the comment and/or approval (as applicable) of certain persons or entities which
are not Affiliates of Comcast but which hold an ownership interest in such Comcast-Related
RSN, (ii) the failure to obtain any such approval shall not constitute a breach of this
Agreement and (iii) upon the form of such agreement being approved by all necessary parties,
Network and Comcast intend to enter into such agreement).
(b) Commencing at least twelve (12) months prior to the anticipated
commercial launch date of the Program Service (with such launch date to be determined in
accordance with the Transaction Documents and referred to herein as the Launch Date, and
the date on which Comcast commences providing such services, the Start-Up Date),
Comcast shall provide such Services if and to the extent reasonably necessary in connection
with preparations for such Launch Date, including those technical operations, financial, legal
and other back-office functions that are reasonably necessary prior to, and in preparation for,
the Launch Date (the Start-Up Services). For the avoidance of doubt, Comcast shall not be
obligated to perform any of the Start-Up Services or other Services hereunder prior to the
Start-Up Date.
(c) Network agrees that, in connection with providing the Services for
Network, Comcast may need to enter into contracts on behalf of and binding upon Network
(which contracts may also bind other Comcast-Related RSNs) or incur certain expenses
chargeable to Network without the need to obtain Networks prior approval in each instance
because such Service-related contracts are essential for the basic operational infrastructure or
basic operational needs of the Business and therefore are non-discretionary in nature
(collectively, Non-Discretionary Transactions). Subject to Section 4.1 hereof, provided
that (i) such Non-Discretionary Transactions are entered into by Comcast in good faith and
2
(NY) 05726/377/AGTS/MSA.doc
are consistent with similar transactions entered into on behalf of or chargeable to other
Comcast-Related RSNs in similar circumstances and (ii) such Non-Discretionary Transactions
are entered into consistent with Section 2.4(d) below (if applicable), Comcast shall be free to
enter into such Non-Discretionary Transactions and bind the Network without the need to
obtain the prior approval of Network. By way of illustration, but not limitation, NonDiscretionary Transactions include purchases of products or services necessary for Comcast to
provide the Services described in Sections 2, 3, 4, 5, 6, 7 and 12 of Attachment B (e.g. payroll
processing services, IT services, benefits plans, audit services, treasury services, insurance,
and, where appropriate in accordance with Section 12 of Attachment B, engagement of
outside counsel). Comcast agrees to use reasonable efforts to provide notice of and consider
in good faith any Network requests or preferences with respect to Non-Discretionary
Transactions. Except as set forth above in this Section 2.1(c), Comcast acknowledges and
agrees that any and all other undertakings and actions by Comcast on behalf of Network in
connection with providing the Services (i.e. all Service-related transactions other than NonDiscretionary Transactions) shall be subject to approval by Network. For the avoidance of
doubt, Network acknowledges and agrees that, where any approval right exists for Network,
such approval right shall be exercised by Network in accordance with the LLC Agreement
and, except to the extent Comcast seeks to bind Network to an agreement with a Comcast
Affiliate, the mere fact that Comcast is binding the Network in a transaction in which other
Comcast-Related RSNs are interested parties shall not in and of itself render the Comcast
Member (as defined in the LLC Agreement) an interested or conflicted party under Section
5.8 of the LLC Agreement with respect to its appointed directors right to vote on Networks
granting of any such approval.
Section 2.2
Employee Matters.
Section 2.3 Tangible Assets Used in Connection with the Services. Except as
otherwise agreed to in writing by Comcast and Network:
(a) To the extent Comcast, in connection with performing the Services, and/or
Network, in connection with the Services, in each case in accordance with this Agreement, uses
any of Comcasts, or any Comcast Affiliates, assets, equipment, facilities or other tangible
personal property (the Comcast Assets), title to such Comcast Assets shall remain with
Comcast or any Comcast Affiliate (as applicable) at all times and Network shall have no right,
title or interest therein. Network acknowledges that nothing in this Agreement shall grant
Network any right, title or interest in any Comcast Asset, except as otherwise expressly set forth
in a Transaction Document or any other agreement between the parties.
(b) To the extent Comcast uses any of Networks assets, equipment, facilities
or other tangible personal property (the Network Assets) in connection with performing the
Services in accordance with this Agreement, title to such Network Assets shall remain with
Network at all times and Comcast shall have no right, title or interest therein. Comcast
acknowledges that nothing in this Agreement shall grant Comcast any right, title or interest in
any Network Asset.
Section 2.4
(a) Any packaging or bundling of Network with any other network or other
services owned or operated by Comcast (or a Comcast Affiliate) as a part of Comcasts
affiliation sales strategy for Network shall be subject to the Networks and Comcasts mutual
agreement.
(b) Comcast shall devote such time, personnel and resources as are reasonably
necessary to, and shall, ensure the proper, timely and efficient provision of such Services to
Network in a manner that is, under the circumstances, at a minimum, consistent in all material
respects with (i) operational needs of the Program Service, (ii) the specifications and
descriptions of such Services set forth on Attachment B, (iii) the same highest level and
quality of service that Comcast uses when providing similar services to any other ComcastRelated RSN, and (iv) Applicable Law and any applicable league rules and/or regulations.
4
(NY) 05726/377/AGTS/MSA.doc
(c) In providing the Services, in general, Comcast shall allocate its time,
personnel and resources equitably and fairly as between the Network and all other ComcastRelated RSNs based on the totality of the circumstances and shall not base such allocation of
time, personnel and resources on the amount or nature of any Comcast Partys ownership
interest in such Comcast-Related RSN.
(d) With respect to bulk purchases of products or services made by Comcast
from non-Affiliate third-parties on behalf of the Comcast-Related RSNs negotiated primarily
on the total volume of all participating Comcast-Related RSNs, Comcast agrees that it shall
not discriminate against Network in negotiating the pricing, benefits and other terms available
to Network under such agreements. With respect to all other purchases of products or services
from non-Affiliate third-parties negotiated by Comcast on Networks behalf, Comcast shall
use commercially reasonable efforts to obtain for Network the best pricing, benefits and other
terms available to Network under the circumstances. Notwithstanding anything stated in this
Agreement to the contrary, however, with respect to all purchases, Network acknowledges
that the availability of such pricing and other terms may be based on third party-imposed
factors or conditions (e.g. the timing of the transaction, a prerequisite that a participating
network be a controlled affiliate of Comcast, have a certain volume of subscribers, distribute a
certain amount of games, be distributed in a certain geographic area, or have a particular
programming composition and other factors or considerations), which may result in certain
products or services not being available to Network or being available to Network at higher
pricing, or different terms than those available to other Comcast-Related RSNs.
(e) Network shall be responsible for payment of any and all fees and expenses
payable pursuant to any third party contracts entered in accordance with this Agreement to
which it is a party. Comcast or a Comcast Affiliate may, with the prior approval of the
Network, enter into agreements that bind the Network, which agreements may or may not
include other Comcast-Related RSNs or other Comcast entities. Network shall either pay
third parties directly for any amounts payable under third party contracts or reimburse
Comcast as an Out-of-Pocket Cost any amounts allocated to (so long as such allocation
methodology was approved in connection with Networks approval of the agreement) or
payable by Network under such contracts that are paid by any Comcast Affiliate.
Section 2.5 Information Provided by Network. Network acknowledges and agrees that
in providing the Services (including preparation of financial information and reports as set forth
in Attachment B) pursuant to this Agreement, Comcast will rely upon, and assume the accuracy
and completeness of, any financial and other information provided by Network to Comcast for
such purposes, and Comcast shall not assume responsibility for the accuracy and completeness of
information to the extent that it is generated or provided in reliance on inaccurate information
provided for such purpose by Network to Comcast (and not originally provided to Network by
Comcast), which information Comcast does not actually know is inaccurate. Comcast
acknowledges and agrees that all information relating to Network that is obtained by Comcast in
connection with the provision by Comcast of the Services, including any information, analyses,
summaries, notes, data and other documents and materials prepared by Comcast containing or
reflecting or generated from such information (including preparation of financial information and
reports as set forth in Attachment B) (but excluding, for the avoidance of doubt, any such
information, analyses, summaries, notes, data and other documents and materials (or any portion
5
(NY) 05726/377/AGTS/MSA.doc
thereof) to the extent not based on information (x) obtained by Comcast in connection with the
provision by Comcast of the Services or (y) otherwise provided to Comcast by the Network), is
the property of Network, and Comcast shall promptly provide all such information to Network at
the request of Network and such information shall be treated as Confidential Materials of
Network in accordance with Section 6.8 hereof.
Section 2.8
Legal Conflict Waiver. Network hereby acknowledges that Comcast
attorneys performing legal services as contemplated by Attachment B hereunder are employees or
sub-contractors of Comcast or certain of its Affiliates (for itself and on behalf of its non-Comcast
owners), and such Comcast attorneys shall timely disclose to Network any conflicts of interest
that may arise as to any material issue that may exist in connection with or arise out of such
representation. After such notice, Network shall either (i) waive such conflict or (ii) require that
Comcast attorneys not represent Network in the applicable matter and engage independent
counsel (unless Comcast otherwise agrees in writing to non-independent counsel) to represent its
interests in such matter at Networks sole cost and expense, with such counsel to be selected by
Network in accordance with the other Transaction Documents. In addition, Network shall be
entitled to raise any potential conflict of interest by notifying Comcast of such a perceived
conflict, and after such notice require that Comcast attorneys not represent Network in the
applicable matter and engage its own counsel to represent its interests in such matter at Networks
sole cost and expense. In such case (as to an unwaived Comcast-disclosed conflict or an
unwaived Network-raised conflict), Comcast shall be relieved from any obligation to provide
legal services for such matter with no reduction in any fees or expenses (to the extent such
expenses were incurred prior to Networks election to engage alternate counsel) payable to
Comcast hereunder.
6
(NY) 05726/377/AGTS/MSA.doc
Section 2.9
7
(NY) 05726/377/AGTS/MSA.doc
Section 3.3
Section 3.4
Late Payments. If Network does not make a payment on or before the
date such payment is due under this Agreement, such payment shall accrue interest at the lower of
eight percent (8%) per annum or the highest rate permitted by Applicable Law, compounded
monthly, until such payment is paid to Comcast in full; provided, however, that Comcast shall be
required to give the Network a minimum of five (5) business days notice, with a copy to each
Network Board member, prior to any accrual of interest (for purposes of clarification such notice
may be given to the Network beginning five (5) business days prior to the payment due date).
Section 3.5 Reduction of Payments. Notwithstanding anything to the contrary
contained here, (a) if Network is not able to exploit substantially all of the rights granted to it
under the Media Rights Agreements on or by October 1, 2012 as a result of any action, suit, claim
or proceeding made by ARC Holding, Ltd., a Texas limited partnership (Fox), or any Affiliate
of Fox, Network shall only be obligated to pay fifty percent (50%) of the Service Fee (as adjusted
pursuant to Section 3.1 but without giving effect to any adjustment pursuant to Section 5.3, but
remaining subject to Section 5.3) until the earlier of (i) such time as Network is able to exploit
substantially all of such rights and (ii) the exercise of the Put/Call Right (as defined in the
Transaction Agreement) in accordance with Section 6.01 of the Transaction Agreement and (b) in
the event that either of the Media Rights Agreements ceases to be in effect, the Service Fee shall
be reduced to an amount equal to eighty percent (80%) of the otherwise applicable Service Fee (as
adjusted pursuant to Section 3.1 but without giving any effect to any adjustment pursuant to
Section 5.3, but remaining subject to Section 5.3).
Section 3.6
Comcast Certification. Comcast shall cause a Comcast officer, after
conducting reasonable investigation, to certify to Network on each anniversary of this Agreement
Comcasts compliance with its obligations under Section 2.4(c) hereof; provided, however, that
failure to provide such certification shall not be deemed a breach of this Agreement unless such
failure remains uncured for thirty (30) days following written notice to Comcast by Network.
ARTICLE 4 - TERM AND TERMINATION
Section 4.1
Term; Suspension.
(a) The term of this Agreement and the rights and obligations set forth herein shall
commence on the Effective Date and shall terminate as set forth in Section 4.2 below (the
Term). In the event this Agreement is terminated, such termination shall be effective as set
forth in Section 4.2.
(b) Upon delivery of an Exercise Notice pursuant to Section 6.01 of the Transaction
Agreement, Comcasts rights under Section 2.1(c) shall be suspended until the earlier to occur of
(i) the Unwind Termination Date (as defined below) or (ii) the date on which Astros Member or
Rockets Member delivers notice to Comcast Member that it or any of its Affiliates disputes the
right of Comcast Parent to deliver such Exercise Notice. The Unwind Termination Date shall
mean the earlier to occur of (x) provided that Comcasts rights under Section 2.1(c) remain
8
(NY) 05726/377/AGTS/MSA.doc
suspended pursuant to this Section 4.1(b), the fifth Business Day after delivery of an Exercise
Notice pursuant to Section 6.01 of the Transaction Agreement and (y) the date on or following
delivery of such an Exercise Notice on which Rockets Member and Astros Member deliver to
Comcast Member an irrevocable written notice indicating that none of Rockets Member, Astros
Member or any of their Affiliates (other than Network and the General Partner or any
Subsidiaries thereof) disputes the exercise of the Put/Call Right (as defined in the Transaction
Agreement) contemplated by Section 6.01 of the Transaction Agreement.
Section 4.2 Termination. Prior to the expiration of the Term, this Agreement shall be
terminated as follows:
(a) automatically upon dissolution of Network in accordance with the terms of
the Partnership Agreement, with such termination to be effective upon the effective date of such
dissolution;
(b) automatically, if Comcast (i) applies for or consents to the appointment of
a custodian of any kind, whether in bankruptcy, common law or equity proceedings, with respect
to all or any substantial portion of its assets; (ii) becomes insolvent or is unable, or admits in
writing its inability, to pay its debts generally as they become due; (iii) makes a general
assignment for the benefit of its creditors; (iv) files a petition seeking relief under the United
States Bankruptcy Code, or if such a petition is filed by any of its creditors, such petition is
approved by a court of competent jurisdiction and such approval is not vacated within sixty (60)
days; (v) shall have had an order of relief entered under the United States Bankruptcy Code with
respect to its debts by a court of competent jurisdiction, whether such order of relief was
proposed by a creditor or any other person whomsoever; or (vi) dissolves and liquidates or
otherwise ceases to do business;
(c) at the election of Comcast, by written notice executed by Comcast (the
Comcast Termination Notice) and delivered to Network, if Network (i) applies for or
consents to the appointment of a custodian of any kind, whether in bankruptcy, common law or
equity proceedings, with respect to all or any substantial portion of its assets; (ii) becomes
insolvent or is unable, or admits in writing its inability, to pay its debts generally as they become
due; (iii) makes a general assignment for the benefit of its creditors; (iv) files a petition seeking
relief under the United States Bankruptcy Code, or if such a petition is filed by any of its
creditors, such petition is approved by a court of competent jurisdiction and such approval is not
vacated within sixty (60) days; (v) shall have had an order of relief entered under the United
States Bankruptcy Code with respect to its debts by a court of competent jurisdiction, whether
such order of relief was proposed by a creditor or any other person whomsoever; or (vi) dissolves
and liquidates or otherwise ceases to do business;
(d) at the election of Network, by written notice executed by Network (the
Network Termination Notice) and delivered to Comcast, in the event that Comcast is in
material breach of any of its obligations or covenants in this Agreement, such termination to be
effective upon delivery of such written notice (if such breach is of a nature that cannot be cured)
or thirty (30) days following the delivery of such notice (for a curable breach that has not been
cured within such thirty (30)-day period);
9
(NY) 05726/377/AGTS/MSA.doc
transaction which would result in neither Comcast nor any Comcast Affiliate owning a direct
equity interest in Network, such termination to be effective upon the closing of such transaction;
(j) at the election of Comcast, by Comcast Termination Notice delivered to
Network, in the event that Network is in material breach of any of its obligations or covenants in
this Agreement, such termination to be effective upon delivery of such written notice (if such
breach is of a nature that cannot be cured) or thirty (30) days following the delivery of such
notice (for a curable breach that has not been cured within such 30 day period);
(k) in the case of a Force Majeure Event, in accordance with Section 5.3;
(l) automatically upon the Unwind Termination Date;
(m) at the election of Network, by Network Termination Notice delivered to
Comcast, in the event that Comcast Parent (or NBCU) ceases directly or indirectly to own all of
the LP Interests (as defined in the LLC Agreement) and Shares (as defined in the LLC
Agreement) owned by it immediately following the closing of the Transaction Agreement,
except pursuant to a Comcast Strategic Transaction or a transaction resulting from a Comcast
Regulatory Condition; and
(n) automatically in the event that both of the Media Rights Agreements cease
to be in effect.
Section 4.3 Notice of Certain Transactions. Within fifteen (15) business days after
Comcast Parent or any of its Affiliates enters into a definitive agreement providing for a
transaction of the type referred to in Section 4.2(e), 4.2(f), 4.2(g), 4.2(i) or 4.2(m) that would
give rise to a termination right, Comcast shall provide written notice to Network of the execution
of such agreement.
Section 4.4 Transition. Upon the termination of this Agreement pursuant to Section
4.2, (a) Comcast shall deliver to Network all books, records and other materials maintained on
behalf of Network; provided, however, that Comcast shall have a right to maintain a copy thereof
for archival purposes; and (b) the Parties shall cooperate in good faith to ensure the smooth and
orderly transition of the Services from Comcast to Network or such other third party(ies) that
Network designates to provide such Services following such expiration or termination, subject to
Networks compliance with the provisions of this Agreement, including payment of Service
Fees, through the date of termination in accordance with Section 4.2, and Out-of-Pocket Costs.
Section 4.5 Survival. The termination or expiration of this Agreement shall not affect
any of the provisions of this Agreement which are expressly or by implication to come into or
continue in force after such termination or expiration, including Articles 3 (for all periods prior
to such termination or expiration as well as with respect to any Out-of-Pocket Costs incurred
following the Term in accordance with Section 4.4), 5, 6 and this Article 4 (and any Section or
provision hereof required to implement or establish the meaning of the provisions of such
Articles).
11
(NY) 05726/377/AGTS/MSA.doc
Section 5.1
Indemnification.
(a) Subject to Section 5.1(c) hereof, Network shall, at its expense, defend,
indemnify and hold harmless each Comcast Party from and against any and all damages,
liabilities, losses, judgments and costs and expenses (including reasonable attorneys fees)
(collectively Damages) incurred by any Comcast Party (i) arising out of any material breach of
this Agreement by Network or (ii) in connection with the defense or settlement of all claims,
suits, judgments, proceedings or causes of action brought by any other third party (collectively
Claims) in which a Comcast Party may be involved or threatened to be involved, as a party or
otherwise, solely arising out of a Comcast Partys performance of its obligations under this
Agreement, regardless of whether this Agreement continues to be in effect or the Comcast Party
continues to be a Comcast Party at the time any such Claims are made or Damages incurred;
provided, however, that such Claims or Damages did not arise out of the gross negligence, fraud
or willful misconduct, as determined by a final, non-appealable court order, of any Comcast
Party or any subcontractor of any Comcast Party or a material breach of this Agreement by any
Comcast Party.
(b) Subject to Section 5.1(c) hereof, Comcast shall, at its expense, defend,
indemnify and hold harmless each Network Party from and against any and all Damages incurred
by any Network Party (i) arising out of any material breach of this Agreement by any Comcast
Party or (ii) in connection with the defense or settlement of all Claims in which a Network Party
may be involved or threatened to be involved, as a party or otherwise, arising out of the gross
negligence, fraud or willful misconduct, as determined by a final, non-appealable court order, of
any Comcast Party or any subcontractor of any Comcast Party in connection with the
performance of such Comcast Partys or subcontractors obligations under this Agreement,
regardless of whether this Agreement continues to be in effect or the Network Party continues to
be a Network Party at the time any such Claims are made or Damages incurred; provided,
however, that such Claims or Damages did not arise out of the gross negligence, fraud or willful
misconduct, as determined by a final, non-appealable court order, of any Network Party or any
subcontractor of any Network Party or a material breach of this Agreement by any Network
Party.
(c) The Parties hereto acknowledge and agree that (i) Comcasts
indemnification rights under Section 5.1(a) shall not be limited as a result of, and its
indemnification obligations under Section 5.1(b) shall not include, any Damages to the extent
they result from the inaccuracy or omission of any financial or other information provided by
such Network personnel having apparent authority to provide such information, provided that
Comcast had no reasonable basis to believe such financial or other information was inaccurate or
incomplete, and (ii) the indemnification rights of the Comcast Parties and the Network Parties set
forth in this Section 5.1 are not an exclusive remedy for a breach of this Agreement by any Party.
(d) Notwithstanding any provision of this Agreement to the contrary, Comcast
shall not be liable to any of the Network Parties, and Network shall not be liable to any of the
Comcast Parties (in each case whether under the indemnification provisions of this Section 5.1 or
otherwise), for any consequential, reliance or special Damages suffered by the Network Parties
12
(NY) 05726/377/AGTS/MSA.doc
or the Comcast Parties, as the case may be (including Damages for harm to business, lost
revenues, lost savings, or lost profits suffered by the Network Parties or the Comcast Parties, as
the case may be), whether in contract, warranty, strict liability, tort or otherwise, including
negligence of any kind, whether active or passive, and regardless of whether the possibility that
such Damages could result was known, except to the extent that any such Damages are the result
of intentional misrepresentations, fraud or willful misconduct of, as applicable, Network or its
Affiliates, on the one hand, or Comcast or its Affiliates, on the other hand; provided, however,
that the terms of this Section 5.1(d) shall not apply in the event of such consequential, reliance or
special Damages actually suffered by the Network Parties or the Comcast Parties as a result of
third party Claims.
Section 5.2 Indemnification Procedure. Each Comcast Party and each Network Party
(an Indemnified Party, as applicable) will promptly notify the Indemnifying Party in writing
of any claims subject to this indemnity and the Indemnifying Party, upon the Indemnified Partys
request, will assume the defense of any third-party claim for which indemnification is sought,
including the employment of counsel. So long as the Indemnifying Party is actively conducting
the defense of such third-party claim, the Indemnified Party will have the right to retain its own
counsel, but the fees and expenses of such counsel will be at the expense of the Indemnified Party
unless (i) the Indemnifying Party has agreed to the retention of such counsel or (ii) the named
parties to any such proceeding include both Comcast and Network and, based upon the advice of
counsel to either Comcast or Network, representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them that would interfere
with such defense. So long as the Indemnifying Party is conducting the defense of any Claim
pursuant to this Section 5.2, (x) the Indemnifying Party will not be liable for any settlement of any
Claim effected without its written consent (such consent not to be unreasonably withheld) and (y)
the Indemnified Party must cooperate in the defense of such Claim at the expense of the
Indemnifying Party (such expenses not to include fees and expenses of counsel for the
Indemnified Party unless clause (i) or (ii) above is applicable). The Indemnifying Party shall not
settle any Claims without the written consent of the Indemnified Party (with such consent not to
be unreasonably withheld) unless such settlement is solely for monetary payment, does not
include any admission of liability by or on behalf of the Indemnified Party, and contains an
explicit and unconditional release of the Indemnified Party.
Section 5.3
promptly. If a condition constituting a Force Majeure Event exists for more than ninety (90)
consecutive days, the Parties shall negotiate in good faith a mutually satisfactory solution to the
problem, if practicable, which, for the avoidance of doubt, may include, without limitation, an
equitable adjustment of the Service Fee; provided, however, that if a Force Majeure Event
prevents Comcast from performing a material portion of the Services in accordance with this
Agreement and the Parties cannot agree upon a solution within ninety (90) days of such meeting,
then (a) Network may give notice of its intent to terminate this Agreement and (b) this Agreement
shall terminate five (5) days following receipt by Comcast of such notice. For the avoidance of
doubt, upon the termination of this Agreement pursuant to the foregoing sentence, Comcast shall
not be required to forfeit any installment of any Service Fee (or portion thereof) that has been paid
to Comcast pursuant to Section 3.1. Notwithstanding the foregoing provisions of this Section 5.3,
neither of the Parties hereto shall be required to settle any labor dispute in any manner.
ARTICLE 6 - MISCELLANEOUS
Section 6.1
(a) Any provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by each Party, or
in the case of a waiver, by the Party against whom the waiver is to be effective.
(b) No failure or delay by any Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 6.2
(a) This Agreement shall be governed, construed and interpreted in accordance with the
laws of the State of Delaware without regard to principles of conflicts of laws.
(b) The Parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought exclusively in any federal court located in the
State of Delaware or any Delaware state court, and each of the Parties hereby irrevocably
consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying of the venue of
any such suit, action or proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any Party anywhere in the world, whether within or
without the jurisdiction of any such court.
(c) Each of the Parties hereto voluntarily and irrevocably waives trial by jury in any suit,
action or other proceeding arising out of or in connection with this Agreement.
14
(NY) 05726/377/AGTS/MSA.doc
Section 6.3 Notices. All notices, requests, demands and other communications
required or permitted to be given or delivered under or by reason of the provisions of this
Agreement shall be in writing (which shall include notice by telecopy or like transmission), shall
be deemed given upon actual receipt (or refusal of such receipt) and may be sent by personal
delivery, facsimile transmission, overnight Federal Express, or similar bonded, overnight courier
service or certified first-class mail, return receipt requested, to the parties at the following
addresses and facsimile numbers (or such other addresses and facsimile numbers as a Party may
have specified by notice given to the other parties hereto pursuant to this provision):
If to Network to:
Houston Regional Sports Network, L.P.
1510 Polk Street
Houston, TX 77002
Telecopier: (713) 758-7404
Attention: Rafael Stone
With copies to:
Rocket Ball, Ltd.
1510 Polk Street
Houston, TX 77002
Attention: Tad Brown, Chief Executive Officer
Phone: (713) 758-7386
Facsimile: (713) 963-7313
and
JTA Sports, Inc.
1200 North Federal Highway, Suite 411
Boca Raton, Florida 33432
Attention: Leslie L. Alexander
Facsimile: (561) 368-4143
and
Houston McLane Company, LLC
Union Station Building
Minute Maid Park
501 Crawford
Houston, Texas 77002
Attention: Pam Gardner, President of Business Operations
Facsimile: (713) 259-8909
15
(NY) 05726/377/AGTS/MSA.doc
If to Comcast to:
Comcast Sports Management Services, LLC
1701 JFK Boulevard
Philadelphia, Pennsylvania 19103
Attn: President
Telephone: 215-286-5786
Facsimile: 215-286-5548
and
Attn: SVP & General Counsel
Telephone: 215-286-5758
Facsimile: 215-286-5746
with copies to:
Comcast Corporation
One Comcast Center
1701 John F. Kennedy Blvd.
Philadelphia, Pennsylvania 19103
Attention: SVP & General Counsel
Telephone: 215-286-7564
Facsimile: 215-286-7794
Assignment.
(a) This Agreement shall be binding upon and inure to the benefit of the Parties hereto.
No Party may assign, delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of each other Party, and any assignment, delegation
or transfer without such consent shall be null and void and of no effect, except that Comcast may
assign, delegate or otherwise transfer its rights and obligations under this Agreement to an
Affiliate which provides similar services to other Comcast-Related RSNs and Network may
assign, delegate or otherwise transfer its rights and obligations under this Agreement to one or
more of its Affiliates (any such Affiliate, an Affiliate Transferee) at any time; provided,
however, that in the event an Affiliate Transferee ceases to be an Affiliate (or, in the case of
Comcast, ceases either to be an Affiliate or ceases to provide similar services to other ComcastRelated RSNs) of the Party that transferred such rights and/or obligations (such party, the
Transferor Party), the Affiliate Transferee shall promptly transfer such rights and/or
obligations back to the Transferor Party; provided, further, that no assignment, delegation or
16
(NY) 05726/377/AGTS/MSA.doc
transfer shall relieve the assigning Party of its obligations hereunder or enlarge, alter or change
any obligation of any other Party hereto.
(b) Notwithstanding anything to the contrary contained in Section 6.5(a), unless
otherwise required by Applicable Law or unless 100% of Comcast is transferred to NBC
Universal, Inc., a Delaware corporation, or any successor thereto (NBCU), or an NBCU
Affiliate Controlled (as defined in the Partnership Agreement) by NBCU, in connection with the
closing of the transactions contemplated by the Master Agreement dated as of December 3, 2009
by and among General Electric Company, Comcast Corporation, NBCU and the other parties
referred to therein (the Master Agreement), pursuant to an Assignment and Assumption
Agreement substantially in the form attached as Exhibit M to the Transaction Agreement,
Comcast shall assign, delegate or transfer all (but not less than all) of its rights and obligations
under this Agreement to NBCU or an NBCU Affiliate Controlled by NBCU contemporaneously
with the closing of the transactions contemplated by the Master Agreement. Such assignment,
delegation or transfer shall be effective contemporaneously with the closing of the transactions
contemplated by the Master Agreement; provided that if Comcast fails to send the Network the
Assignment and Assumption Agreement duly executed by Comcast and NBCU within one
Business Day of such closing, such assignment, delegation or transfer shall be effective at the
time Comcast sends such executed agreement to the Network. From and after the date of any
such assignment, delegation or transfer, NBCU or such NBCU Affiliate Controlled by NBCU
shall assume all of Comcasts rights and obligations under this Agreement and Comcast shall
have no further rights or obligations under this Agreement. For the avoidance of doubt, if the
closing under the Master Agreement does not occur for any reason, no assignment, delegation or
transfer otherwise required pursuant to this Section 6.5(b) shall be required.
(c) Notwithstanding anything to the contrary contained in Section 6.5(a), pursuant to an
Assignment and Assumption Agreement substantially in the form attached as Exhibit M to the
Transaction Agreement, Comcast may assign, delegate and transfer all (but not less than all) of
its rights and obligations under this Agreement to the acquiror in a Comcast Strategic
Transaction or a transaction resulting from a Comcast Regulatory Condition upon the closing of
such Comcast Strategic Transaction or such transaction resulting from a Comcast Regulatory
Condition, but in either case only if the acquiror (i) has or, after giving effect to such Comcast
Strategic Transaction or such transaction resulting from a Comcast Regulatory Condition, will
have a substantial business operating, promoting, marketing and exploiting regional sports
networks or a national sports network or (ii) is acquiring substantially all of Comcast Parents
and its Affiliates regional sports network business and substantially all of the group within
Comcast Parent that manages Comcast Parents and its Affiliates regional sports network
business. Such assignment, delegation or transfer shall be effective contemporaneously with the
closing of such Comcast Strategic Transaction or such transaction resulting from a Comcast
Regulatory Condition; provided that if Comcast fails to send the Network the Assignment and
Assumption Agreement duly executed by Comcast and such acquiror within one Business Day
of such closing, such assignment, delegation or transfer shall be effective at the time Comcast
sends such executed agreement to the Network. From and after the date of any such assignment,
delegation or transfer, Comcast shall have no further rights or obligations under this Agreement.
Section 6.6 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
17
(NY) 05726/377/AGTS/MSA.doc
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
Section 6.7 Days. All references herein, including the Attachments attached hereto, to
the term days shall mean calendar days.
Section 6.8 Confidentiality.
(a) Each of the Parties agrees that both the terms and conditions of this Agreement and
the Confidential Materials will be kept confidential by each Party and its respective employees
and will not be disclosed in any manner, in whole or in part, by such Party or its employees
without the prior written consent of the other Party, except (i) as may be required by Applicable
Law or any stock exchange on which such Partys or such Party's Affiliates' securities are traded,
(ii) to such Partys attorneys, accountants, financial advisors, other representatives, lenders (to
such Party or to any Affiliate of such party) and Affiliates (provided that such persons agree to
keep such information confidential and such disclosing party is responsible for any breach by
any such person), (iii) as necessary in connection with negotiating the terms of a direct or
indirect transfer of interests in Network or General Partner that is permitted by the Transaction
Documents (provided that such transferees agree in writing to keep such information confidential
and such disclosing party is responsible for any breach by any such potential transferee), (iv) to
Major League Baseball and the National Basketball Association if mandated by such entities
(provided that such Party agrees to seek confidential treatment from such entities to the extent
available), and (v) in the case of Comcast, to General Electric Company and its Affiliates
(provided that such persons agree in writing to keep such information confidential). The
foregoing notwithstanding, nothing herein shall be deemed to limit or restrict a party from
disclosing any information in any action or proceeding by such party that is necessary to enforce
any rights that such party may have under this Agreement.
(b) As used herein, the term Confidential Materials means any information or
materials, whether written or oral, tangible or intangible, concerning the General Partner, its
Subsidiaries (as defined in the LLC Agreement) and their businesses, markets, products,
prospects and finances in such Partys possession. Notwithstanding the foregoing, with respect
to a Party, the term Confidential Materials shall not include (A) information that was known
to, and material that was in the possession of, such Party prior to the date such Party became a
Party, (B) information that is or becomes generally known to, and materials possessed by, the
public at large or entities involved in the businesses in which the General Partner and its
Subsidiaries operate (other than as a result of a breach hereof by such Party), (C) information or
material acquired by such Party independently from a third party (other than a third party that
such Party knows, or has reason to know, is under an obligation of confidentiality to the General
Partner or Network) and (D) information or material independently developed by such Party and
not as a result of the disclosure of information or provision of materials by the General Partner or
any of its Subsidiaries.
such, except as otherwise specifically provided in the Partnership Agreement. Neither Party has
any authorization to enter into any contracts or assume any obligations for the other Party or make
any warranties or representations on behalf of another Party other than as expressly authorized
herein or in the other Transaction Documents. No subscriber of Network or its distributors shall
be deemed to have any privity of contract or direct contractual or other relationship with Comcast
by virtue of this Agreement or Comcasts provision of the Services to Network hereunder.
Network disclaims any present or future right, interest or estate in or to the facilities or intellectual
property of Comcast or any Comcast Affiliate, except for such rights as may be expressly granted
to Network herein or in any of the Transaction Documents. Comcast disclaims any present or
future right, interest or estate in or to the facilities or intellectual property of Network or any
Network Party, except to the extent incorporating Comcast intellectual property and for such
rights as may be expressly granted to Comcast herein or in any of the Transaction Documents.
Section 6.10 No Third Party Beneficiaries. This Agreement shall inure solely to the
benefit of each of the Parties and their permitted successors and assigns, and, except as otherwise
expressly set forth in Article V of this Agreement, nothing in this Agreement is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 6.11 Severability. If any covenant or provision hereof is determined to be void
or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any
other covenant or provision, each of which is hereby declared to be separate and distinct. If any
provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable. If any provision of this Agreement is declared invalid or
unenforceable for any reason other than overbreadth, the offending provision will be modified so
as to maintain the essential benefits of the bargain among Comcast and Network to the maximum
extent possible, consistent with Applicable Law and public policy.
Section 6.12 No Recourse. Notwithstanding anything contained in this Agreement to
the contrary, it is expressly understood and agreed by the Parties hereto that each and every
representation, warranty, covenant, undertaking and agreement made in this Agreement was not
made or intended to be made as a personal representation, undertaking, warranty, covenant or
agreement on the part of any incorporator, stockholder, director, officer, partner, member,
manager, employee or agent of the Network or its general partner (including Astros Partner,
Astros Member or Astros Parent and Rockets Partner, Rockets Member or Rockets Parent (as
defined in the LLC Agreement) and any Comcast Party that is a member of the general partner),
past, present or future, or any of them, and any recourse, whether in common law, in equity, by
statute or otherwise, against any of them in connection with the matters set forth in this
Agreement is hereby forever waived and released.
Section 6.13 Entire Agreement. This Agreement, together with the other Transaction
Documents and the letter agreement referred to in Section 4.04(e) of the Transaction Agreement,
sets forth the entire understanding of the Parties with respect to the subject matter hereof and
supersedes any prior oral or written agreements, understandings, representations or covenants
with respect to the transactions contemplated herein.
19
(NY) 05726/377/AGTS/MSA.doc
IN WITNESS WHEREOF, the Parties have executed and delivered this Comcast Network Services Agreement as of the date first written above.
COMCAST SPORTS MANAGEMENT
::~~
Name:Robert S. Pick
Title: Senior Vice President,
Corporate Development
IN WITNESS WHEREOF, the Parties have executed and delivered this Corncast Network Services Agreement as of the date first written above.
COMCAST SPORTS MANAGEMENT
SERVICES, LLC
By: ________________________
Name:
Title:
~--
By:
Name: Tad Brown
Title: Authorized Representative
By: _______________________
Name: Pamela Gardner
Title: Authorized Representative
IN WITNESS WHEREOF, the Parties have executed and delivered this Comcast Network Services Agreement as of the date first written above.
COMCAST SPORTS MANAGEMENT
SERVICES, LLC
NETWORK, L.P.
By: ___________________________
Name:
Title:
Titl~
BY:~
Nam~e~:P~a~m~e~la~G~M~dn=er~~~~~r--
ATTACHMENT A
DEFINITIONS
Affiliate shall have the meaning ascribed thereto in the Partnership Agreement.
Affiliate Transferee has the meaning ascribed thereto in Section 6.5(a).
Agreement shall have the meaning ascribed thereto in the preamble.
Applicable Law means any applicable constitution, treaty, statute, rule, regulation, ordinance,
order, directive, code, interpretation, judgment, decree, injunction, writ, determination, award,
permit, license, authorization, directive, requirement or decision of or agreement with or by any
government, any governmental entity, department, commission, board, agency or
instrumentality, and any court, tribunal or judicial or arbitral body, whether federal, state, local
or foreign.
Astros Member has the meaning ascribed thereto in the LLC Agreement.
Board means the Board of Directors of the General Partner.
Claims has the meaning ascribed thereto in Section 5.1(a).
Comcast has the meaning ascribed thereto in the preamble.
Comcast Affiliation Agreement means that certain affiliation agreement by and between the
Network and Comcast Cable dated as of the date hereof.
Comcast Assets has the meaning ascribed thereto in Section 2.3(a).
Comcast Cable means Comcast Cable Communications, LLC, a Delaware limited liability
company.
Comcast Member has the meaning ascribed thereto in the LLC Agreement.
Comcast Parent means Comcast Corporation.
Comcast Party means: (i) Comcast; (ii) its Affiliates; (iii) the directors, shareholders, employees
and officers of Comcast and its Affiliates; and (iv) the respective successors, heirs, executors and
legal representatives of the foregoing.
Comcast-Related RSN means any other RSN in which a Comcast Affiliate owns a direct or
indirect interest and as to which Comcast or any Comcast Affiliate provides services of the type
contemplated herein.
Comcast Termination Notice has the meaning ascribed thereto in Section 4.2(c).
A-1
(NY) 05726/377/AGTS/MSA.doc
costs (i) are incurred solely for the convenience of Comcast because Comcast personnel that
otherwise would provide a particular Service are unavailable or unable for any reason to provide
such Service directly, or (ii) are in connection with Comcast fulfilling its indemnification
obligations as described in Section 5.1(b). Out-of-Pocket Costs shall include professional fees,
insurance premiums, third-party collection fees, costs incurred on matters specific to Network
requiring expertise beyond the expertise of Comcast employees, and license and other fees due
under third party contracts (e.g. music library fees, fees under content licenses, Nielsen and other
research fees, production fees, etc.).
Partnership Agreement means that certain amended and restated agreement of limited
partnership of Network entered into by its general partner and its limited partners, dated as of the
date hereof, including any amendment, modification or supplement thereto.
Party means, as applicable, Comcast or Network.
Program Service has the meaning ascribed thereto in the recitals.
Rockets Member has the meaning ascribed thereto in the LLC Agreement.
RSN has the meaning ascribed thereto in the recitals.
Service Fee has the meaning ascribed thereto in Section 3.1.
Services has the meaning ascribed thereto in Section 2.1.
Subsidiaries has the meaning ascribed thereto in the LLC Agreement.
Term has the meaning ascribed thereto in Section 4.1.
Territory has the meaning ascribed thereto in the Comcast Affiliation Agreement and Media
Rights Agreements.
Transaction Agreement means the Transaction Agreement, dated as of the date hereof, by and
among Houston McLane Company, LLC, McLane HRSN GP Holdings LLC, McLane HRSN LP
Holdings LLC, Rocket Ball, Ltd., JTA Sports, Inc., Rockets Partner, L.P., Houston SportsNet
Holdings, LLC, Comcast Corporation, Houston Regional Sports Network, LLC and Houston
Regional Sports Network, L.P., including any amendments, modifications or supplements
thereto.
Transaction Documents has the meaning ascribed thereto in the Transaction Agreement.
Transferor Party has the meaning ascribed thereto in Section 6.5(a).
A-3
(NY) 05726/377/AGTS/MSA.doc
ATTACHMENT B
SERVICES
Unless otherwise expressly indicated below, Network will retain and have responsibility, at its
expense, for staffing and providing the services set forth below. Comcasts responsibilities shall
be to ensure the timely oversight and support of, and to provide the below-listed services to,
Network and its own personnel in carrying out these functions:1
1.
2.
Payroll Services
Comcast will provide the following payroll services on Networks behalf:
All payroll processing/reporting to outside vendor regarding actual payroll, associated tax
filings and annual reporting.
3.
IT Support/Infrastructure Services
Comcast will provide the following IT support/infrastructure services on Networks
behalf:
a.
data center management and operation of data center computing equipment and
its ancillary equipment, systems, services and associated networks;
To the extent Comcast or any Affiliate thereof enters into any agreements for the benefit of Network and one or
more Comcast-Related RSN or other networks managed by any Comcast Party, associated expenses or revenue
shares (as applicable) associated with the above will be apportioned among Network and other Comcast-related
networks in accordance with Section 8 of this Attachment B.
B-1
(NY) 05726/377/AGTS/MSA.doc
b.
c.
d.
e.
The Parties agree that this Service shall not include 1) provision of computers, phone,
handheld devices or other computer and communication peripherals or hardware to
Network employees or 2) any of items (a) through (e) in relation to operation of
Networks distribution outlets in television, broadband or any other media (e.g., web
hosting services).
4.
The Parties agree that this Service shall not include payment of outside legal or
consulting fees directly relating to Network human resource matters, which shall be
billable to Network as Out-of-Pocket Costs.
5.
Financial Services
Comcast will provide the following financial services on Networks behalf:
a.
b.
c.
d.
e.
f.
g.
h.
(NY) 05726/377/AGTS/MSA.doc
6.
7.
oversee and maintain Networks corporate books and records, including minutes;
and
preparation of corporate documents (e.g., written consents, owner approvals, etc.).
property;
workers compensation;
auto;
primary general;
excess liability;
media; and
D&O.
The Parties agree that the payment of insurance premiums (including any agency
commissions) shall be billed to Network as Out-of-Pocket Costs. Network will be
charged for all premiums, (i) as allocated among Network and Comcasts other managed
networks, in proportion to their respective size and policy limits, or (ii) 100% for policies
obtained specifically for Network.
8.
9.
(NY) 05726/377/AGTS/MSA.doc
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
10.
(NY) 05726/377/AGTS/MSA.doc
d.
e.
f.
g.
11.
Advertising Services
Comcast will provide general guidance for advertising sales-related functions, including:
a.
b.
c.
d.
e.
f.
12.
(NY) 05726/377/AGTS/MSA.doc
c.
d.
e.
f.
g.
h.
For the avoidance of doubt, Business & Legal Affairs Services shall not include highlevel, specialized legal advice relating to matters of 1) local law, 2) outside collection
costs, or 3) issues unique and discrete to Network, each of which will be referred to
outside counsel. The Parties agree that outside counsel fees shall be billed to Network as
Out-of-Pocket Costs. If a matter for which Network is charged outside counsel fees
affects Comcasts other managed networks, such fees will be allocated among Network
and such other networks in proportion to their respective uses of such services.
13.
14.
(NY) 05726/377/AGTS/MSA.doc
a.
b.
c.
d.
e.
f.
g.
h.
Additionally, in the event of a Force Majeure Event or other occurrence that prevents
Networks use of its own studio, production facilities or personnel, Comcast shall use
commercially reasonable efforts to arrange for the use by Network, and at Networks cost
(which shall constitute Out-of-Pocket Costs), of studios, facilities and personnel at
Comcast-Related RSNs or other Comcast Affiliate facilities as designated by Comcast, if
and to the extent available without interruption to other Comcast Affiliate or ComcastRelated RSN operations, to address any short-term needs.
Specifically, with respect to Start-Up Services, Comcast will do the following (subject to
Network approval of terms and conditions of any binding agreements applicable to any of
the following):
a.
b.
c.
d.
e.
f.
g.
h.
j.
15.
(NY) 05726/377/AGTS/MSA.doc
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
16.
17.
develop and oversee digital media strategy for Network together with other
Comcast-Related RSNs;
provide intelligence on site reporting, analytics and competitive landscape;
negotiate and manage 3rd party content relationships, syndication agreements,
SEO and SEM;
liaison with other digital properties Affiliated with Comcast;
identify emerging technologies and relevant business opportunities (i.e. social
media, mobile, live streaming, VOD); and
share best practices across Comcast-Related RSNs.
chyron insert graphics packages for sports, news and talk programs (SD & HD);
animation (3D & 2D) Packages for sports, news and talk programs (SD & HD);
internal on-going graphic support for special events including logo supervision,
show packaging and design and branding direction;
internal creation of league and team-specific in-game animated elements (SD &
HD);
set and lighting design for studio productions for news, talk & pre-/post-game
programs;
overall on-air look, including music for news, talk and live event programs;
coordination of spot production for Network TV advertising;
creative services for on-air promotions, print and outdoor advertising;
media planning and analysis; and
B-8
(NY) 05726/377/AGTS/MSA.doc
j.
Communications
Comcast will provide general guidance and oversight in the following areas:
a.
b.
c.
d.
e.
19.
Programming Rights
Subject to Networks eligibility for participation in such contracts, and provided Network
elects to be included in such contracts, Comcast will, consistent with its provision or
procurement of programming rights to or for other Comcast-Related RSNs and the
consideration and other terms applicable to other Comcast-Related RSNs:
a.
b.
c.
d.
e.
negotiate any national rights agreements with collegiate conferences (e.g. SEC,
CUSA, A-10, CAA) and national leagues (e.g. MLS, NLL, AVP, WPS, etc.) on
behalf of Network together with other relevant Comcast-Related RSNs;
negotiate any national time-buy sports agreements;
negotiate any national infomercial programming agreements;
provide guidance regarding structuring local time-buy and infomercial rates; and
facilitate communications with respect to best practices with other ComcastRelated RSNs.
B-9
(NY) 05726/377/AGTS/MSA.doc
EXHIBIT 1
FORM OF PROGRAM AND CONTENT SHARING AND LICENSE AGREEMENT
(NY) 05726/377/AGTS/MSA.doc
Exhibit 1
WHEREAS, Comcast itself, from time to time, may create and/or produce (or cause to be
created and/or produced) or may license from third parties rights to use, create and/or produce (or
cause to be used, created and/or produced) audio, visual and/or audio-visual works, including
television programs or segments, news content, graphics elements, music, promotional materials, and
other original or licensed works (collectively, the "Comcast Content");
WHEREAS, Network from time to time may create and/or produce (or cause to be created
and/or produced) or may license from third parties rights to use, create and/or produce (or cause to be
used, created and/or produced), audio, visual and/or audio-visual works, including television
programs or segments, news content, graphic elements, music, promotional materials, and other
original or licensed works (collectively, the "Network Content"); and
WHEREAS, Comcast wishes to grant Network a license to Exhibit (as defined in
Attachment A) the Comcast-Related RSN Content and the Com cast Content as and to the extent
available for license to, and use by, Network in accordance with and subject to the terms and
conditions of this Agreement (collectively, the "Available Com cast Content"), and Network wishes
(NY) OS726/377/AGTS/Program and Content License Agrcement.doc
to grant Comcast a license to Exhibit the Network Content as and to the extent available for license
to, and use by, Comcast and/or the Comcast-Related RSNs, as applicable, in accordance with and
subject to the terms and conditions of this Agreement (the "Available Network Content" and,
together with the Available Comcast Content, the "Licensed Content");
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as
follows:
1.
2.
Rules of Construction.
(a)
Defined Terms. All initially capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in Attachment A.
(b)
(c)
Headings and Captions. The division of this Agreement into Articles and
Sections, the insertion of headings and the use of particular words as defined
terms are for convenience of reference only and shall not affect the construction
or interpretation of this Agreement.
Grant of Rights.
(a)
Limitations, such license includes the right for Comcast (including the ComcastRelated RSNs to which Comcast has granted a sublicense) to use (1) brief
excerpts of the Available Network Content and (2) the name, voice, likeness and
biographical material of all persons working or appearing in the Available
Network Content, to advertise and promote Comcast and the Comcast-Related
RSNs and for related and institutional advertising.
(2)
Except as provided herein, Comcast shall not have the right to sublicense
any Available Network Content to any third part(ies) (except, subject to
Network Usage Limitations, to Comcast-Related RSNs and/or distributors of
Comcast's or the Comcast-Related RSNs' programming services as part of the
license of such programming services), without the prior written consent of
Network.
(3)
Nothing set forth herein shall be deemed to grant Comcast or the
Comcast-Related RSNs any copyright or other intellectual property right in the
Available Network Content, except the right to Exhibit the Available Network
Content, and, where permitted, incorporate the Available Network Content in
works produced by or on behalf of Comcast or Comcast-Related RSNs (as
applicable), all as expressly set forth in this Agreement and subject to any
Network Usage Limitations. With respect to Available Network Content, as
between Network, on the one hand, and Comcast and the Comcast-Related
RSNs, on the other hand, Network shall retain all copyrights and intellectual
property rights in the Available Network Content.
(c)
Additional Use Limitations; Responsibility For Clearances. Notwithstanding
anything in this Agreement to the contrary, the Parties hereby acknowledge and agree
that: (i) the rights and obligations of the Parties (and any applicable Comcast-Related
RSN or authorized sublicensees) are subject and subordinate to all Supplier and Sports
Association Restrictions, and that use by a Receiving Party of Restricted Content
therefore may be limited or restricted; and (ii) use of Restricted Content may be
conditioned on the Receiving Party's compliance with certain obligations imposed by
third parties or imposed by the Providing Party, including territorial limitations,
clearance requirements, advertising category restrictions or other restrictions on
advertising, editing or modification restrictions, and limitations on the forms or means
of Media Distribution used by the Receiving Party with respect to particular Restricted
Content. Although a Providing Party shall endeavor to provide the Receiving Party with
written notice of the particular clearance or other requirements or other conditions of use
related to any Restricted Content when it is provided, it shall be the sole responsibility
of the Receiving Party to determine the existence and applicability of, and to comply
with, any applicable Usage Limitations, and the Receiving Party shall be liable to the
Providing Party for any non-compliance with such restrictions.
(d)
Other License Conditions. For the avoidance of doubt, the Parties acknowledge
and agree that (i) subject to the terms and conditions of Sections 4(b), 4(c) and 4(d), a
Party may only be a Receiving Party, and shall only have the right to Exhibit the
4
(NY) 05726/377/AGTS/Program and Content License Agreemcnl.doc
Licensed Content which is licensed to it hereunder during the Term and (ii) each
Comcast-Related RSN shall only have the right to receive and Exhibit Available
Network Content under sublicense from Comcast to the extent that such ComcastRelated RSN has entered into an agreement with Comcast on substantially similar terms
and conditions to those set forth in this Agreement.
Scope o(Licensed Content. The Parties acknowledge and agree that (i) the
(e)
Licensed Content shall only be licensed to the Receiving Party hereunder as and to the
extent the Providing Party makes such Licensed Content available for license to the
Receiving Party and subject to Section 4(d), the Providing Party shall have absolute
discretion as to what content it makes available to the Receiving Party and nothing
herein shall be construed as requiring the Providing Party to make any other content
available to the Receiving Party, even ifsuch content is fully licensable by the Providing
Party; and (ii) unless otherwise agreed by the Receiving Party, the Receiving Party shall
have the right, but not the obligation, to Exhibit such Licensed Content during the Term
in accordance with the terms and conditions of this Agreement.
3.
Commercial Inventory. Subject to Comcast Usage Limitations, Network (and its designees)
shall have the right to use or sell any and all Available Commercial Inventory within Network's
Exhibition of the Available Comcast Content and shall have the right to retain any and all revenues
from any sale of such Available Commercial Inventory. Subject to Network Usage Limitations,
Comcast and the Comcast-Related RSNs, as applicable, (and their respective designees) shall have
the right to use or sell any and all Available Commercial Inventory within Comcast and/or the
Comcast-Related RSNs, as applicable, Exhibition of the Available Network Content and shall have
the right to retain any and all revenues from any sale of such Available Commercial Inventory.
4.
Termination; Suspension.
(a)
This Agreement may be terminated, in whole or in part, as follows (each an "Event
of Termination"):
(i)
(ii)
immediately by either Party in the event that the other Party is in material
breach of this Agreement and fails to remedy the same (or develop a plan
reasonably acceptable to the other Party to cure such breach) within thirty
(30) days after receipt of a written notice giving particulars ofthe breach and
requiring it to be remedied;
(iii)
in the event ofa Change of Control of the other Party (for the purposes ofthis
Agreement, "Change of Control" of a Party means (A) the sale, lease,
transfer, conveyance or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of such Party and its
Subsidiaries (if any), taken as a whole, or (B) a transaction or series of
transactions (including by way of merger, consolidation, sale of stock or
otherwise) the result of which is that any person, entity or "group" (as defined
in Section 13 of the Securities Exchange Act of 1934) acquires Control of
such Party; or
(v)
(b)
Upon the occurrence of any Event of Termination with respect to any Receiving
Party, said Receiving Party shall cease using the Available Network Content or Available
Comcast Content (as applicable), or any derivation thereof, in any form (other than in
connection with a partial termination pursuant to Section 4(a)(iii), which shall apply only to
the affected Available Network Content or Available Com cast Content). Each Party, in its
capacity as a Receiving Party acknowledges that the Providing Party shall be entitled to
injunctive relief (in addition to any other rights and remedies) in a court of competent
jurisdiction in the event that a Receiving Party fails to promptly cease using any Available
Network Content or Available Comcast Content as required hereunder.
(c)
Notwithstanding the termination of this Agreement, the Parties acknowledge and
agree that to the extent any Licensed Content is embedded within any derivative work created
or produced pursuant to a license granted herein during the Term in accordance with this
Agreement (a "New Work"), the Receiving Party's right to continue to Exhibit such New
Work shall be limited to the form and manner in which it exists as the date of termination
and shall survive termination (subject to any and all Usage Limitations);providedthat, in the
event the Receiving Party makes any modifications to the New Work after the Term, unless
the Providing Party otherwise consents to the use of the Licensed Content in connection with
such modified version of the New Work, the Receiving Party must remove the Licensed
Content from such modified version of the New Work.
(d)
Notwithstanding anything in this Agreement to the contrary, subject to Section 4(c)
above, in the event that Comcast believes in good faith that Network, in its capacity as a
Providing Party, is not participating sufficiently in the "pool" described in Section Sea),
taking into account the type and amount of Licensed Content being made available by the
other Providing Parties, Comcast reserves the right to terminate this Agreement or otherwise
suspend the license granted to Network pursuant to Section 2(a)(I) indefinitely.
(e)
Notwithstanding anything in this Agreement to the contrary, Sections 2(c) and
Articles 4, 7, 8 and 10 shall survive any termination of this Agreement.
S.
Consideration.
6
(a)
Each Party recognizes the benefits it receives by electing to be part ofa "pool" of
(i) Network Content, (ii) Comcast-Related RSN Content and (iii) Comcast Content and
that in order to exercise the rights granted herein (and, in the case of Comcast, to
sublicense the right to Exhibit Available Network Content to Comcast-Related RSNs) a
Receiving Party must be willing to participate as a Providing Party in the "pool" (subject
in all cases to Usage Limitations).
(b)
Network acknowledges and agrees that: (i) in order to receive certain Available
Comcast Content, Network, along with Comcast-Related RSNs, may, from time to time,
be required to contribute to the costs (including any third party license fees) associated
with the creation, production, development, acquisition and/or licensing from a third
party of such Available Comcast Content, in whole or part, by or on behalf of Comcast
or a Comcast-Related RSN (as applicable) ("Paid Content") prior to being authorized
to Exhibit such Paid Content; and (ii) unless otherwise agreed by Network and Comcast
(including in any Applicable Services Agreement), Network's share of costs for such
Paid Content shall be allocated by Comcast in good faith (it being understood that only
those Comcast-Related RSNs which agree to so contribute to the costs associated with
the creation, production, development, acquisition and/or licensing of such Paid Content
may be granted rights to Exhibit such Paid Content).
6.
7.
7
(NY) OS726/377/AGTS/Program and Conlcnl l.ieeose Agreemcol.doe
award of any court or arbitrator or any law, rule, or regulation under which it is bound or
subject.
(b)
EXCEPT AS OTHERWISE PROVIDED IN SECTION 7(a) ABOVE, EACH
PROVIDING PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES
OF ANY KIND; HOWEVER, TO THE EXTENT AVAILABLE, EACH PROVIDING
PARTY AGREES TO PASS THROUGH TO THE RECEIVING PARTY ANY AND
ALL THIRD PARTY WARRANTIES AND INDEMNITIES RELATED TO THE
LICENSED CONTENT TO THE EXTENT SUCH PROVIDING PARTY HAS THE
RIGHT TO DO SO.
8.
party, then, if requested by the Providing Party, the Receiving Party agrees to immediately
cease use of such Licensed Content and otherwise cooperate with the Providing Party in the
resolution of such dispute. Neither the Providing Party nor the Receiving Party shall have
any obligation to incur any incremental out-of-pocket costs or fees in order to clear Licensed
Content for use by the other Party. Notwithstanding the foregoing, the Providing Party and
Receiving Party agree to cooperate in good faith to inform each other of necessary clearances
and to provide status of clearance issues upon request from the other Party. In addition,
notwithstanding anything stated in this Agreement to the contrary, unless otherwise agreed
between the Providing Party and Receiving Party, no Providing Party furnishing Licensed
Content hereunder shall be liable to a Receiving Party for clearing any music performance or
synchronization or other music rights or licenses, it being understood that any Receiving
Party utilizing any Licensed Content containing such music shall be responsible, at its cost,
for obtain any necessary licenses to the extent required.
Unless otherwise agreed by the Parties in writing, each Receiving Party shall
(c)
indemnify, defend, and hold harmless the Providing Party from and against all losses, claims,
damages, liabilities, demands, proceedings, and costs (including reasonable legal costs)
related to or arising out of the use of the Licensed Content by the Receiving Party and the
exercise of the Receiving Party's rights and obligations under this Agreement.
9.
Force Majeure. Neither of the Parties will be liable for nonperformance or defective or late
performance of any of its obligations hereunder, or be in breach of any term or condition of this
Agreement for such nonperformance or defective or late performance, to the extent and for such
periods of time as such nonperformance, defective, or late performance is due to reasons outside
such Party's control, including acts of God, war (declared or undeclared), acts (including failure to
act) of any governmental authority, riots, revolutions, acts of terrorism, fire, floods, explosions,
sabotage, nuclear incidents, lightning, weather, earthquakes, storms, sinkholes, epidemics, labor
disputes (including strikes, lockouts or other work stoppage), restrictions imposed by law or
government order, mechanical or computer breakdown (to the extent not within a Party's reasonable
control), or delays of suppliers or subcontractors for the same causes (each a "Force Majeure
Event"); provided, however, that the Party affected by a Force Majeure Event shall promptly notify
the other Party of the condition constituting such Force Majeure Event and shall exert reasonable
efforts to overcome any of the causes thereof and to resume performance ofits obligations promptly.
If a condition constituting a Force Majeure Event exists for more than ninety (90) consecutive days,
the Parties shall negotiate in good faith a mutually satisfactory solution to the problem, if practicable.
Notwithstanding the foregoing, neither Party shall be required to settle any labor dispute in any
manner.
10.
Miscellaneous.
(a)
Amendments. This Agreement may only be amended by a writing signed by
Network and Comcast.
proceeding seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be brought in
the United States District Court for the Southern District of New York or any New York
State court sitting in New York City, and each of the Parties hereby irrevocably consents to
the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any Party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service
of process on such Party as provided in Section IO(c) shall be deemed effective service of
process on such Party. Each Party voluntarily and irrevocably waives trial by jury in any suit,
action or other proceeding arising out of or in connection with this Agreement.
If to Corneast to:
(t)
Construction. The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement.
Confidentiality. (i) Each Receiving Party shall retain the Confidential Information of
(g)
the Providing Party (including the Confidential Information of any Comcast-Related RSN) in
the strictest confidence (on a need to know basis) and shall not disclose such Confidential
Information to any Person without the Providing Party's express written consent, other than
on a need-to-know basis to an employee, agent or professional advisor ofthe Receiving Party
or an Affiliate thereof. Notwithstanding anything to the contrary in this Agreement, the
obligation to maintain the confidentiality of such Confidential Information shall not apply to
the extent that the Receiving Party (A) is required to disclose such Confidential Information
pursuant to law or a legally enforceable order of a court or judicial body; provided that the
Receiving Party provides notice to the Providing Party to enable the Providing Party to seek a
protective order or an injunction, or (B) has not yet been notified (in writing and within ten
days of disclosure) that information given orally is confidential or proprietary.
(ii)
With respect to the terms and conditions of this Agreement, it is
understood and agreed that each Party may disclose the terms and conditions of this
Agreement: (A) in confidence, to its accountants, banks and present and prospective
financing sources and their advisors; (B) in connection with the enforcement of this
Agreement or rights under this Agreement; (C) in confidence, in connection with an
actual or proposed merger, acquisition or similar transaction involving such Party; (D) in
confidence, to its Affiliates; (E) in confidence, to its third party contractors who have a
need to know, solely in connection with their provision of services to such Party; (F) as
required by applicable securities laws or the rules of any stock exchange on which
securities of such party are traded or any other applicable regulatory rule or regulation or
governmental agency directive or request; provided, however, that prior to making any
such disclosure, such Party shall provide notice to the other Party regarding the nature and
extent of the disclosure to enable the other party to seek to obtain confidential treatment,
to the extent available, for such Confidential Information; or (0) as mutually agreed upon
by the Parties.
(h)
No Implied Waivers. Except for a written waiver executed by a Party, no action
taken pursuant to this Agreement, including any investigation by or on behalf of either Party,
shall be deemed to constitute a waiver by the Party taking such action of compliance with any
representations, warranties, agreements, covenants, obligations or commitments contained
herein or made pursuant hereto. The waiver by either Party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or succeeding
breach. Except where a time period is specified, no delay on the part of any Party in the
exercise of any right, power, privilege or remedy hereunder shall operate as a waiver thereof,
12
(NY) 05726/377/AGTS/PrOb'Tam and Content L,cense Ab'Teement doc
nor shall any exercise of any such right, power, privilege or remedy preclude any fUliher
exercise thereof or the exercise of any other right, power, privilege or remedy. Said rights
and remedies are given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
(i)
Relationship. Nothing in this Agreement shall be construed to render Comcast and
Network partners or joint venturers or to impose upon any of them any liability as such,
except as otherwise specifically provided in the Partnership Agreement. Neither Party has
any authorization to enter into any contracts or assume any obligations for the other Party or
make any warranties or representations on behalf of another Party other than as expressly
authorized herein. No subscriber of Network or its distributors shall be deemed to have any
privity of contract or direct contractual or other relationship with Comcast or any ComcastRelated RSN by virtue of this Agreement. Network disclaims any present or future right,
interest or estate in or to the facilities or intellectual property of Comcast or any ComcastRelated RSN, except to the extent incorporated intellectual property of Network or any ofits
Subsidiaries and for such rights as may be expressly granted to Network herein or any other
agreement between Network and Comcast or any Comcast-Related RSN. Comcast disclaims
any present or future right, interest or estate in or to the facilities or intellectual property of
Network or any of its Subsidiaries, except to the extent incorporating intellectual property of
Comcast or a Comcast Affiliate and for such rights as may be expressly granted to Comcast
herein or any other agreement between Network and Comcast.
Benefit and Burden,' No Third Party Beneficiaries. This Agreement shall inure
solely to the benefit of each of the Parties and their permitted successors and assigns, and
nothing in this Agreement is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement; provided, however, each
Comcast-Related RSN, in its capacity as a Providing Party, shall be an intended third party
beneficiary of this Agreement for the purposes of Sections 2(c), 2(d), 4(b), 4(c) and 6(b) and
Articles 8 and 10 to the extent applicable to such Providing Party.
U)
(k)
Severability. If any covenant or provision hereof is determined to be void or
unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of
any other covenant or provision, each of which is hereby declared to be separate and distinct.
If any provision of this Agreement is so broad as to be unenforceable, such provision shall
be interpreted to be only so broad as is enforceable. If any provision of this Agreement is
declared invalid or unenforceable for any reason other than overbreadth, the offending
provision will be modified so as to maintain the essential benefits of the bargain among
Comcast and Network to the maximum extent possible, consistent with Applicable Law and
public policy.
(1)
No Recourse. Notwithstanding anything contained in this Agreement to the contrary,
it is expressly understood and agreed by the Parties that each and every representation,
warranty, covenant, undertaking and agreement made in this Agreement was not made or
intended to be made as a personal representation, undertaking, warranty, covenant or
agreement on the part of any incorporator, stockholder, director, officer, partner, member,
manager, employee or agent of Network or its general partner, past, present or future, or any
13
(NY) 05726/371!AGTSlProgram and Content License Agreemenl.doc
of them, and any recourse, whether in common law, in equity, by statute or otherwise, against
any of them in connection with the matters set forth in this Agreement is hereby forever
waived and released.
(m)
Entire Aereement. This Agreement, together with the Applicable Services
Agreement, represent the entire understanding and agreement between the Parties with
respect to the subject matter of and the transactions contemplated hereby and thereby and
supersede all prior negotiations among the partners of Network with respect to the
transactions contemplated hereby and thereby; provided. however, nothing herein is intended
to alter, modify or otherwise amend any other understanding or agreement between the
Parties to the extent not directly related to the subject matter of this Agreement. Reasonable
efforts shall be made to interpret and give full force and effect to the provisions of this
Agreement within the four comers of this Agreement.
[The Remainder O/This Page Is Intentionally Left Blank]
14
(NY) 05726f377/AGTSfProgram and Content License Agreement.doc
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly
authorized representatives on the date first written above.
COMCAST SPORTS MANAGEMENT
SERVICES, LLC
8y: _____________________________
8y: ____________________________
Name:
Title:
Name:
Title:
15
(NY) 05726/377/AGTS/Program and Content License Agreement.doc
ATTACHMENT A
DEFINITIONS
Affiliate means, with respect to a specified Person, any other Person that directly or indirectly
through one or more intermediaries Controls, is Controlled by, or is under common Control with,
such specified Person; provided, however, that neither Network nor any of its Subsidiaries shall
be deemed to be an Affiliate of Comcast or any of its Affiliates (and, for the avoidance of doubt,
vice versa).
Applicable Services Agreement means the applicable services agreement or similar arrangement
between the Parties pursuant to which Comcast provides management oversight, services and
support to Network in connection with the Program Service.
Available Commercial Inventorv means all commercial spot time (if any) that is available for
use within any Licensed Content during the Receiving Party's (or its sublicensee's, to the extent
permitted hereunder) Exhibition of such Licensed Content (but only to the extent that such
commercial spot time (if any) is not reserved by the Providing Party or a third party) (it being
understood that Available Commercial Inventory shall not include commercial spot time that is
available for use within any Licensed Content during any other Person's Exhibition of such
Licensed Content).
Comeast Parent means Comcast Corporation (i.e., Comcast's ultimate parent company).
Comcast-Related RSNmeans any RSN (other than Network or any of its Subsidiaries) in which
a Comcast Affiliate owns a direct or indirect interest and as to which Comcast or any Comcast
Affiliate provides services of the type contemplated in the Services Agreement, in each case that
is set forth in Attachment B, as the same may be updated from time to time by Com cast upon
providing prior written notice to Network.
Confidential Information means (i) the terms of this Agreement and (ii) any non-public,
confidential or proprietary information relating to a Party (including a Comcast-Related RSN)
("disclosing party), including any information that is designated by the disclosing party as
Confidential Information at the time of its disclosure, either by a written or visual confidentiality
designation, or orally; provided that (i) written confirmation of such confidential status is
provided to the receiving party within ten (10) days thereafter or (ii) such information would,
under the circumstances, appear to a reasonable person to be confidential or proprietary.
Notwithstanding the foregoing, Confidential Information does not include information,
technical data or know-how which: (A) is in the public domain at the time of disclosure or
becomes available thereafter to the public without restriction, and in either case not as a result of
the act or omission of the receiving party; (B) is rightfully obtained by the receiving party from a
third party without restriction as to disclosure; (C) is lawfully in the possession of the receiving
party at the time of disclosure by the disclosing party and not otherwise subject to restriction on
disclosure; (D) is approved for disclosure by prior written authorization of the disclosing party;
or (E) is developed independently and separately by either party without use of the disclosing
party's Confidential Information.
Control shall mean the direct or indirect power to direct, or cause the direction of, the
management and policies of any Person, whether through the ownership of voting securities, by
contract, by membership or involvement in the board of directors, management committee or
other management structure of such Person or otherwise, and the terms Controlled and
Controlling have correlative meanings.
Distribution Footprint means, with respect to Network and any Comcast-Related RSN, the
primary distribution "footprint" for Network or such Comcast-Related RSN, as applicable (i.e.,
the territory that corresponds to the local territory(ies) of the Major League Baseball, National
Basketball Association and/or National Hockey League teams in respect of which Network or
such Comcast-Related RSN, as applicable, is licensed the local rights to Exhibit a substantial
package of live games of such teams, or, with respect to any Comcast-Related RSN that does not
distribute a substantial package of live games of any such teams, such other geographic area as
may be mutually agreed between Comcast and Network to permit Exhibition of Network Content
by such Comcast-Related RSN.
Effective Date means effective date of the Applicable Services Agreement.
Exhibit means transmit, retransmit, telecast, retelecast, exhibit, re-exhibit, distribute, redistribute and otherwise exploit, perform, and display.
Media Distribution means any and all forms, means or modalities of electronic or other tangible
or non-tangible transmission, distribution, or exhibition of audio, visual or audio-visual
programming (whether now existing or developed in the future), including by means of cable,
wire or fiber of any material, direct broadcast satellite, internet protocol television (IPTV),
wireless, open video systems, over-the-air, telecast, broadcast, in any frequency band and any
format, and any and all forms of electronic or other tangible or non-tangible transmission
(whether analog or digital, via the Internet or any other electronic or non-tangible medium) to or
from any location for transmission, distribution or exhibition or for taping, recording or other
storage on tape, disc or any other means of data retention for subsequent replay (whether now
existing or developed in the future), master antenna, satellite master antenna, full power or low
power transmission, HDTV transmission or any other form of enhanced transmission, closedcircuit transmission, radio, single and multichannel multipoint distribution service and satellite
transmission directly to the home on all basis including broadcast, subscription, pay-per-view,
video-on-demand, interactive download, license, rental, sale or any other means or basis
including broadcast television.
Person means any individual, group, corporation, limited liability company, partnership, joint
venture, association, joint stock company, trust, unincorporated organization, government or
agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary
or other capacity.
J7
(NY) 05726/377/AGTS/Program and Conlenl License Agreemenl doc
Providing Party means a Party providing Licensed Content to the other Party (including, in the
case of Com cast as the provider of Licensed Content, each relevant Comcast-Related RSN with
respect to its Comcast-Related RSN Content).
Receiving Party means a Party receiving Licensed Content from or through the other Party.
Restricted Content means Licensed Content that is subject to Usage Limitations.
Supplier and Sports Association Restrictions means, with respect to programming or content
provided by any Providing Party, (i) all rules, regulations and agreements of applicable third
party programming or content suppliers and all applicable sports leagues and associations (as
such rules, regulations and agreements presently exist and as they may from time to time be
entered into or amended, and as they may be interpreted by the commissioner or other chief
executive thereof) and (ii) any applicable restrictions under any Providing Party's affiliation
agreements.
Subsidiary means, with respect to any specified Person, any other Person directly or indirectly
through one or more intermediaries Controlled by such specified Person; provided, however, that
neither Network nor any of its Subsidiaries shall be deemed to be a Subsidiary of Comcast or any
of its Affiliates.
Term means the period commencing on the Effective Date and ending upon the termination of
this Agreement pursuant to Section 4 (other than a partial termination pursuant to
Section 4(a)(iii.
18
(NY) 05726/377/AGTS/Program and Content License Agreement.doc
ATTACHMENT B
COMCAST-RELATED RSNs
NETWORK, L.P.
Debtor.
TRUST,
Plaintiff,
v.
Defendants.
Chapter 11
EXHIBIT B
TO PLAINTIFFS COMPLAINT